Organisation is a mechanism or structure which helps the activities to be performed effectively. The organisation is established for the purpose of achieving the business objectives.

The business objectives may differ from one business to another. Whatever may be the business objectives, there is a need of an organisation.The word ‘Organisation’ is derived from the word ‘Organism’ which means an organised body with connected interdependent parts sharing common life.

When a group of persons working together to achieve a common goal, the problems such as – who decides what issues, who does what work and what action should be taken on the basis of certain conditions may arise.

Louis Al Allen, “Organisation is that process of identifying and grouping the work to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.”


Learn about:

1. Introduction to Organisation 2. Meaning and Definitions of Organisation 3. Concepts 4. Nature 5. Characteristics 6. Factors 7. Elements 8. Importance 9. Types 10. Purposes 11. Principles 12. Components 13. Process 14. Organisational Relationships.

Organisation: Definitions, Meaning, Concept, Nature, Characteristics, Components, Factors, Elements, Importance and Purposes


  1. Introduction to Organisation
  2. Meaning and Definitions of Organisation
  3. Concepts of Organisation
  4. Nature of Organisation
  5. Characteristics of Organisation
  6. Factors of Organisation
  7. Elements of Organisation
  8. Importance of Organisation
  9. Types of Organisation
  10. Purposes of Organisation
  11. Principles of Organisation
  12. Components of Organisation
  13. Process of Organisation
  14. Organisational Relationships of Organisation

Organisation – Introduction

Organisation is a mechanism or structure which helps the activities to be performed effectively. The organisation is established for the purpose of achieving the business objectives. The business objectives may differ from one business to another. Whatever may be the business objectives, there is a need of an organisation.


The word ‘Organisation’ is derived from the word ‘Organism’ which means an organised body with connected interdependent parts sharing common life. When a group of persons working together to achieve a common goal, the problems such as – who decides what issues, who does what work and what action should be taken on the basis of certain conditions may arise.

An organisation is a human grouping in which the jobs are performed for attainment of specific objectives. Every organisation has its objectives to be fulfilled. Organisations may be of different types and with different objectives.

An organisation may be a manufacturing firm, insurance company, a governmental agency, hospital, university and a religious trust. It may be small or large, simple or complex, objectives of the organisation differ from organisation-to-organisation but remain relatively constant. These are likely to be modified over a period of time with the changing environment.

Business is a human activity carried out by the unified efforts of different categories of people to produce the wealth through production and distribution of goods and services. According to John M. Paul, “the business is a conflict for money and it is a method of cooperation for social justice”. Boone, Louis, and Kurtz, and David (1993) – “Contemporary Business” opined that “the business can be defined as all profit directed economic and commercial activities that provide goods and services necessary to a nation’s standard of living”.


Further the concept of business is supported by Buffa and Plitcher, defined “business is the human activity of converting resources into goods and services for the purpose of bringing the results in profits to the organisation”. From the literatures of the above experts it is said that the business may be understood as the organised efforts of enterprises to earn profit, business may be small or big in size, but all of them air at making profit.

Basically, an organisation in its simplest form is a person or group of people intentionally organised to accomplish an overall, common goal or set of goals. It continues till the objectives of the business are achieved. Barnard and Calitz (2006) – “Managing information systems in Business Management – An entrepreneurial perspective” opined that all enterprises, whether they are in the private or public sector, continuously strives to achieve and sustain business success.

For private enterprises, success at primary objective level is often expressed in terms of the maximisation of profitability, return on investment and shareholders’ wealth, while success at the secondary objective level is expressed in terms of the maximisation of productivity and sales, organisational growth, socio-economic goals, etc. While striving to achieve more or less similar objectives, public enterprises have the added responsibility to deliver various services to the public in the most effective and efficient manner.

Every enterprise is established with clear business goals to be achieved. These business goals can only be achieved if the business succeeds in meeting the expectations of various stakeholders, including customers (goods and services), shareholders (return on investment), employees (employment) and the general public (social responsibility) Johnson and Scholes (1999) – “Exploring corporate strategy”.


Ashwathappa (1999) – “Human Resource and Personnel Management” argued that “the scope of business is vast; the various activities that bring raw materials to the factory and the end products from there to the markets constitute business”. The business includes all efforts to comply with legal restrictions and government requirements and discharging obligations to consumers, employees, owners and to other interest groups which have stakes in the business directly or indirectly.

Organisation – Meaning and Definitions: Suggested by Mc Farland, Haney, Louis Allen, Mooney and Reily, Chester Bernard, R.C. Davis and Oliver Sheldon   

The term ‘Organization’ is derived from the word ‘organism’ which means a structure with its parts so integrated that their relation to each other is governed by the relation to the whole.

The term organization is used in two different senses, namely:

1. Organization as a structure, and


2. Organization as a process.

1. Organization as a Structure:

Organization as a structure is composed of people who develop formal relationship among themselves to accomplish the objectives. Organization structure is designed to classify who is to do what and when and who is responsible for which result.

2. Organization as a Process:


Organization as process is a constant management function with the object of arranging the tasks into manageable units and defining the formal relationship among people who are assigned with various tasks.

Thus, it is observed that organizing is grouping of activities and resources in a logical fashion.

Organisation is the detailed arrangement of work and working conditions in order to perform the assigned activities in an effective manner.

Organisation can be compared to a human body. The human body consists of hands, feet, eyes, ears, nose, fingers, mouth, etc. These parts are performing their work independently and at the same time, one part cannot be a substitute to another. The same principles can be identified in the organisation also. The organisation consists of different departments. Each department performs its work independently and cannot be a substitute to another.

Haney, “Organisation is a harmonious adjustment of specialised parts for the accomplishment of some common purpose or purposes.”

Mc Farland, “An identified group of people contributing their efforts towards the attainment of goals is called an organisation.”

Allen, “The process of identifying and grouping the work is to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.”

Mooney and Reily, “Organisation is the form of every human association for the attainment of a common purpose.”

Chester Bernard, “A system of co-operative activities of two or more persons is called organisation.”

R.C. Davis, “Any group of people, large or small, which has been implemented adequately and is co-operating willingly under the direction of competent executive leadership in an effective, economical accomplishment of certain common objective.”

Louis Al Allen, “Organisation is that process of identifying and grouping the work to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.”

Oliver Sheldon, “Organisation is the process of so combining the work which the individual or groups have to perform with the facilities necessary for its creation that the duties so performed provide the best channels for the efficient, systematic, positive and co­ordinated application of the available efforts.”

Spriegel, “In its broadest sense, organisation refers to the relationship between the various factors present in a given endeavour…. Factory organisation concerns itself primarily with the internal relationships within the factory such as responsibilities of personnel arrangement and grouping of machines and material control. From the stand-point of the enterprise as a whole, organisation is the structural relationship between the various factors in an enterprise.”

Wheeler, “Internal organisation is the structural framework of duties and responsibilities required to personnel in performing various functions within the company…. It is essentially a blue print for action resulting in a mechanism for carrying out the function to achieve the goals set up by the company management.”

Organisation – 5 Basic Concepts: Organisational Hierarchy, Authority and Responsibility, Delegation of Authority, Span of Management and Flat and Tall Organisations 

The following basic concepts provide an insight into the functioning of organisations:

Concept # 1. Organisational Hierarchy:

The hierarchy in a business refers to the layers of management from the top management down to managers or supervisors of the lowest rank. In small businesses, usually, there are few layers of hierarchy. For instance, in sole trader type of organisation, the owner makes and implements all decisions. He acts as both the manager and the worker.

The top management comprises directors or chief executive. It is concerned with formulating strategic, long term plans, and policy decisions within the organisation. It is the responsibility of the top management to ensure that the subordinates implement these plans and decisions.

A clear chain of command runs from the top level to the lowest level, through each department, in the organisation. Orders pass through this chain of command. The data required for certain decisions such as – sales, revenues, output, staff turnover, and the like is forwarded to the top management through periodical reports.

Employees in a hierarchy have varying degrees of authority. Higher levels in the hierarchy are characterised by higher responsibility and authority. Managers need to have authority over their subordinates in order to implement decisions and policies. They have to direct their staff regarding what to do and what is expected of them.

Concept # 2. Authority and Responsibility:

Authority is the power to give commands and to use discretion vested in that particular position or job. If the person is removed from the job, he or she loses the authority. Responsibility is the obligation on the part of the subordinate to complete the given job. If a manager has only authority, he may misuse it.

As a control measure, the employee is held responsible for the results also. Authority can be transferred to lower positions but not responsibility.

The authority and responsibility should always be commensurate and coexistent with each other. Otherwise, the performance of the managers goes unchecked. Where the authority exceeds responsibility, it may lead to mis-utilisation of authority. The manager can get away with it.

On the contrary, where the responsibility exceeds authority, the manager feels frustrated. It is because he is held responsible for more tasks. The authority delegated to him is not in proportion to the responsibility. He has no adequate authority to get the tasks completed.

Concept # 3. Delegation of Authority:

The process of transferring authority from the top to the lower levels in the organisation is called delegation. Although a task may be delegated or passed down the chain of command from a manager to a subordinate, the manager continues to be responsible for making sure that his/her instructions are carried out.

The organisation is said to be centralised when the authority to take decisions is held by the corporate office. If the authority is delegated to the regional offices, then the organisation is said to be decentralised.

Factors Determining the Degree of Decentralisation:

To what extent the authority is to be centralised or decentralised depends on a number of factors such as:

i. How significant and costly is the decision?

ii. Is it necessary to implement policy in a uniform manner?

iii. How big is the organisation?

iv. Does the department have enough economic resources and managerial talent?

v. How was the business built? Had it been built from within or expanded under the directions from the promoters? If it was built from within, it has a tendency for centralised authority. If it was expanded under the directions of the promoters, it provides adequate evidence for handling matters with decentralised authority.

vi. What is the philosophy of management? Decentralisation or centralisation is often considered as a way of organisational life. If the top management wants to retain efficiency and discipline offering its managers freedom of expression, initiative, and decision in the organisational matters, it may choose a decentralised set up.

This may look simple in small organisations. But as organisations grow, this may prove to be an uphill task. On the other hand, if the management prefers to exercise control over its managers to direct them in the day to day organisational matters, the natural choice is centralisation.

vii. What is the competence of managers in the organisation? Can they function independently? Or do they look for guidance at every stage?

viii. Is there adequate number of managers available to head different divisions or departments?

ix. How sophisticated are the control techniques? Are they capable of directing the organisation towards decentralisation? The control techniques here include statistical devices, accounting controls, usage of computers, and others.

x. What is the extent of geographical area over which the activities of the organisation are dispersed? If the area is wide, decentralised organisation is the only choice to take advantage of different types of economies pertaining to division of labour, technology, materials, and markets.

xi. How fast are the changes in the internal and the external environment? The pace with which the enterprise keeps changing in a given market indicates the need for decentralisation. The top management cannot continue to take decisions both at the macro and micro levels in the organisation in ever-changing market conditions. The only alternative is to encourage the managers at the lower levels to use their discretion and take calculated risk.

xii. How influential are the external factors such as – government control over matters relating to prices, labour hours, taxes payable and so on. The tasks relating policy-making over such matters cannot be left to the managers at the department level. In other words, the top levels of management continue to hold the power to take strategic decisions, which effect the performance of the business at the macro level.

Concept # 4. Span of Management:

It is also called span of control. It refers to the number of subordinates that can be effectively controlled by the manager at a given point of time. If the production manager has, say, five employees under his direct control, it means his span is five.

Different opinions have been expressed about the ideal size – varying from four to twelve. It assumes great importance as the number of relationships, after a particular number of subordinates, grows linear with every additional increase.

V. A. Graicunas demonstrated mathematically the increase in the number of relationships arising from each increase in the number of subordinates. He classified superior-subordinate relationships into three categories, which are – (a) direct single relationships, (b) direct group relationships, and (c) cross relationships.

He propounded that:

Where n = number of subordinates reporting to a manager.

The following table illustrates how the increase in relationships grows in a linear way with every increase in the number of subordinates:

The right span depends on several factors such as:

i. How well are your subordinates trained and disciplined?

ii. Is the authority defined clearly?

iii. How clear are the plans?

iv. Can the performance of the subordinates be judged in an objective manner?

v. What is the rate of change?

vi. How sophisticated are the communication techniques prevalent in the organisation?

vii. Does it require a fair degree of personal contact to bring forth the expected results?

Concept # 5. Flat and Tall Organisations:

Flat organisations are those, which have relatively few or even one level of management. Many enterprises have adopted flatter structures to reduce levels of management and bureaucracy and to give their work force greater decision-making responsibilities. A service organisation with 3 equal partners and 30 employees is the best example for a flat structure.

Flat organisations are known by their wider span of control. In other words, each manager controls more number of employees at a given point of time. Flat structured organisations facilitate communication across the organisation.

Generally, the greater the height of the organisation chart, the smaller is the span of control, and vice versa. Tall organisations have many levels of management. Tall structure organisations focus on vertical communication through the levels of grades in it.

Tall organisation structures involve a narrower span of management.

Wide and narrow spans of management are evaluated as given below:

I. Wide Span of Control Advantages:

i. Fewer levels of management and decision-making.

ii. Lower supervision costs.

iii. The subordinates feel more satisfied on the job front with greater decision-making authority.


i. Makes it difficult to supervise the subordinates directly.

ii. Flat structures may not work as the business expands.

II. Narrow Span of Control:


i. Allows for tight control and supervision.

ii. Communication with subordinates is easier.


i. Subordinates may feel left out of the decision-making process and may lack motivation.

ii. Costs related to management and administration tends to increase.

iii. Coordinating decisions of numerous managers becomes difficult.

iv. Too much supervision may hinder initiative and motivation.

To keep the organisations vibrant, cost-effective, and competitive, the modern trend is to reduce the size and length of organisations to lean and flat. Most of the public and private organisations announce ‘golden handshake’ schemes to motivate people to leave the organisation.

Organisation – Nature

The main characteristics of internal organization are as follows:

1. Goal Oriented:

Every organization exists to accomplish some common goals. The structure must reflect these objectives as enterprise activities are derived from them. It is bound by common purpose. So organization is a goal oriented.

2. Division of Work:

The total work of an organization is divided into functions and sub-functions. This is necessary to avoid the waste of time, energy and resources which arises when people have to constantly change from one work to another. It also provides benefits of specialization, efficiency and good performance.

3. Authority Structure:

There is an arrangement of positions into a graded series. The authority of every position is defined. It is sub-ordinate to the position above it and superior to the one below it. This chain of superior-sub-ordinate relationships is known as chain of command. So there should be well defined authoritative structure i.e. relationship.

4. People:

An organization is basically a group of persons. Therefore, activity groupings and authority provisions must take into account the limitations and customs of people. People constitute the dynamic human element of an organization.

5. Communication:

Every organization has its own channels of communication. Such channels are necessary for mutual understanding and cooperation among the members of an organization, which results smooth running.

6. Co-Ordination:

There is a mechanism for coordinating different activities and parts of an organization so that it functions as an integrated whole. Co-operative effort is a basic feature of organization.

7. Environment:

An organization functions in an environment comprising economic, social, political and legal factors. Therefore, the structure must be designed to work efficiently in a changing environment. It cannot be static or mechanistic. But it should be an open dynamic to the environment.

8. Rules and Regulations:

Every organization has some rules and regulations for orderly functioning of people. These rules and regulations may be writing or implied from customary behavior.

Organisation – 17 Main Characteristics

Organisation is not an end in itself. It is merely a means to attain certain specified goal within the framework of which policies and programmes are laid down for the purpose. The existence of an organisation does not depend on its excellent qualities embodies therein. It depends on its practicability and capability of delivering goods.

There is no doubt that any enterprise can grow and prosper only within the limits of the organisation. Hence, an organisation must satisfy certain norms and characteristics in order to justify its existence and to claim that it is sound and would be able to deliver goods.

The following are the major characteristics of a sound, healthy, simple and flexible organisation:

1. Objectivity – Organisation is a means to attain the objectives of an enterprise. For the accomplishment of these objectives the organisation has to make itself efficient, alive and receptive.

2. Harmonious Grouping of Functions – According to set norms and in a planned manner the organisation should make groups and sub-groups in order to achieve maximum organisational success.

3. Reasonable Span of Control – The number of subordinates to be supervised, directed, guided and controlled, should be within a reasonable limit which should be practically manageable. The suggested number is 5 or 6.

4. Clear Allocation of Duties and Responsibilities – In between different categories of managerial, supervisory and opera ting staff there should be a clear allocation of duties and responsibilities in an unambiguous term so that unnecessary confusion may not crop-up in future.

5. Proper Balance – A proper balance between responsibility and authority at all levels of management inclusive of operating staff should be maintained.

6. No Frequent Change in Responsibilities etc. – It should be taken care of that without adequate reasons and proper notice and al- o without careful consideration the nature and scope of re-possibilities and authority of an official should not be changed. Frequent changes without adequate preparation may create confusion and efficiency may suffer.

7. Better Communication – The orders and instructions should flow from ones authority only which should be communicated to all concerned properly and without loss of time. It ensures better co­ordination.

8. Proper Channel Contacts – The subordinates should not be contacted directly neither they should be entertained for any of their personal or official work directly. Everything should move through proper channel following the chain of organisation.

9. Proper Care in Handling the Personnels – Proper care in handling the personnels at every level of organisation helps in better understanding and in promoting good human relations. Care should be taken that no official is criticised either before his colleagues or his subordinates. If this is done it may breed discontent

10. Quick and peaceful disposal of disputes is an essential characteristics of management which a simple and sound organisation can ensure as the responsibilities and authority in such organisations are well defined.

11. Evaluation of Own Performance – Every official should be given opportunity to evaluate his own performances. This will give him confidence resulting into greater efficiency and more work.

12. Satisfaction – The organisation should be capable of satisfying all its personnels from all points of views—personal, organisational, financial and non-financial. Welfare schemes should be well-fitted in the set up.

13. Best Utilisation of Services – The organisation should be able to utilise the services of all its personnels in best possible manner to the advantage of both the organisation and the enterprise. The manner of utilisation should also take full care of the personnel himself.

14. Fiexioility – It should be flexible to the extent that if is able to absorb the new developments in organisational theory and practices.

15. Capable of Attracting Response – The coordinative efforts of the organisation should be capable of inviting attention of each and every employee and it should also be capable of attracting response. Response to the coordinating efforts result obviously in better understanding of the work and problems. A quick solution is rendered possible.

16. Capable of Eliciting Cooperation – The organization should also be capable of eliciting cooperation from all sections of the personnels. This naturally helps in good human relations and efficient working for which every organisation strives.

17. Simple – The organisation should be simple and practice ordered if everyone is able to follow the organisational lineup, its objectives and its working procedure without much of difficulty then obviously the organisation stands. The test of simplicity. Simple organisation automatically becomes practice oriented. More of theories make the understanding difficult. Less of it helps in easy understanding.

This stands in good taste and is acceptable to the personnels. Simplicity of the organisation brings success in every sphere of the organisational and management work.

Organisation – 3 Main Factors: Established Social Standards and Relationships, Psychological and Informal Customs and Groups 

Organising is a very complex activity. One can formally divide the work, assign people, supply ideal work place, define authority and establish relationships with great care and precision to make the organisation effective but still the desired behaviour, co-operation and initiative may be lacking on the pan of its incumbents.

Organisation can not merely be a structure purely based on logic, rationality or economic factors. It is basically a social entity. The organisation influences the behaviour of its people. So the people influence the organisation. People are influenced not only by the organisation in which they work but also by the society and environment in which they live and pass most of their time. So there is interaction between the individual and the organisation.

Individual may be embodied in the organisation and the features of the organisation becomes embodied in him or in contrast. His feelings may be suppressed in the organisation and then he will either react to the organisation’s features or try to impose his own behaviour or he will become non-co-operative and unenthusiastic.

It is, therefore, essential that the following influences are properly organised and incorporated while organising any social institution:

Factor # 1. Established Social Standards and Relationships:

The society or environment immensely influences the behaviour of the individuals working in an organisation. Their level of work performance, attitude, behaviour and satisfaction are determined by social norms, standards practices, belief, customs etc. and not by only physiological capacities.

These social norms must be understood and incorporated for effective co-operation and satisfaction of the members of the organisation. For instance if the custom of the society does not permit free mixing of two sexes at common workplace, the management should provide for different places to work for men and women for better behaviour.

This is because people learn most of the practices, values, beliefs etc. from the society rather than from their personal knowledge and conviction about a matter, and which are firmly established in their thinking and behaviour. Moreover, people usually dislike change because they fear that such changes may break the established relationship to which they are accustomed.

Factor # 2. Psychological Factors:

Organisation requires human beings to assume obligations, exercise authority and to executive the work. Regardless of the duties and responsibilities assigned, the basic fact is that the organisation has to deal with human beings who have different needs, emotions, aspirations, personalities, interests, abilities etc., which must be recognised, utilised and satisfied for their effective and harmonious behaviour towards the achievement of enterprise objectives.

There may be primary needs such as food, water, air, rest, clothing, shelter, sex and general well being and there may be secondary social needs, such as the need of self-assertion, self-esteem social approval, freedom, association with others, self- fulfilment and realisation, Such basic and social needs should get due recognition and satisfaction for effective co-operation.

Factor # 3. Informal Customs and Groups:

Many informal practices, customers and traditions become well established in the organisation and many informal group crop up and influence the conduct and the working of the people. So long as the established customs are desirable and are in conformity with the formally prescribed way of behaviour, there is no difficulty in organising, rather they assist in securing the willing co-operation later on. The manager should try to convince the incumbents for the change of undesirable customers and behaviors.

He should clearly note such undesirable practices, and explain the reasons for their change, demonstrate the benefits of the new customs and introduce changes slowly and gradually keeping in view the willing acceptance on the part of employees.

Groups, not officially prescribed by formal organisation, are termed as informal groups, which strongly influence the behaviour of workers. One informal leader emerges out of the group, who is liked most by his group and then he represents the norms of his group. More than anyone else, his advice is solicited and accepted by group members. He controls the behaviour of his group. He becomes the spokesman of that group to the management and other personnel in the organisation.

In short, he leads the group of workers and helps them to function as a social group. These groups are usually bound together by common social interests. It is folly to ignore the influence of these informal groups in organising. Clever management organises in such a way that the influences and activities of such informal groups tend to support the organisation.

Organisation – 3 Important Elements: Division of Work, Inter-Relationship and Performance by Individuals 

When two are more than two persons join to accomplish a given task then the duties and responsibilities between these persons need a proper division. The work distribution is broadly termed as organisation. Through organisation better relationships between-individuals etc., are established.

Within the management organisation refers to the collection, utilisation and unification of all factors of production with a view to produce, sale and earn profit. In other words establishment of mutual cooperation between different factors of production is referred to as organisation.

There are following three important elements of an organisation:

1. Division of work,

2. Inter-relationship, and

3. Individual performances.

1. Division of Work:

An effective division of work between personnels selected to do a particular job(s) is the foremost function of an organisation. If it is effective it will bear fruits and desired results may be achieved.

2. Inter-Relationship:

Establishment of inter-relationships between jobs, duties responsibilities and authority either in a formal or in an informal way is also a primary function of an organisation without which nothing tangible could be achieved.

3. Performance by Individuals:

Individuals do the assigned jobs. Whether an individual or a group – of individuals is doing the assigned duties and carrying out the responsibilities in accordance with the instructions are not to be observed and any deviation should have to be reported on for adequate action against the erring group or individual.

The organisation ensures it by preparing a scheme of inspection and supervision. It also make one answer able for his work and conduct. It also aims at the strict adherence of the rules etc., framed for the purpose. Unless it is done the very purpose of organisation will be defeated.

The elements enumerated above are not in any way complete. The final word is not there in the dictionary of any behavioural science as the very nature of a behavioural science makes it a growing and a living science. It is true for an organisation (as a part of such sciences) also. Organisation makes it obligatory on the part of its practitioners to effect changes according-to need and time, nature of the job handled individual’s capabilities and above all according to the requirement of the enterprise.

Organisation of any enterprise should be simple. Indeed it is simple so long personnels working for it face no problem in the undertaking which they are serving and their assigned Jobs, duties, responsibilities authority and answerability and mutual relationships are well defined.

Similarly an organisation should be flexible. Flexibility comes from adaptability, adjustment capabilities and accommodating nature in the line of organisation drawn for the enterprise. World is changing rapidly. Any humanity, must be prepared to such rapid changes and should be able to change itself according to the demand of the situation.

This is why we cannot have a final word for any principle, characteristics or element. A room for addition, subtraction and improvement is always there.

Organisation – Importance

(1) Efficiency in Management:

Organization lays a foundation for focusing managerial attention and actions on the accomplishment of its goals and objectives.

It can become an effective and efficient instrument for realizing its goals and objectives only if it has in place an arrangement for selection of competent and talented workers, development of special­ization among them, proper assignment of duties and activities and delegation of requisite authority to carry them out, and effective coordination and control of performance at all levels. It should also be flexible enough to be adapted to the needs of any change in circumstances.

Planning, direction and control will deliver the desired results only when these functions are undertaken within the framework of a properly designed and balanced organization. For example, it would be useless to plan for anything if there is no arrangement whereby various duties and activities can be assigned to employees on the basis of their specialization in performing their respective jobs.

Again, assignment of responsibility among subordinates will be meaningless if adequate author­ity is not given to them to discharge their duties and activities, and if arrangement does not exist to coordinate and control activities at different levels.

(2) Instrument of all-Round Development:

A balanced organization helps business to grow and develop through expansion, diversification, and entry into unexplored markets. It has a fully equipped arsenal of physical, financial and human resources and the ability to add to them, if required, to meet any challenge posed by external environ­ment through introduction of new and multi-purpose goods in the market.

(3) Adoption of New Technology—Organization has the Resources to do so:

The effectiveness of an organization is measured by the capacity of its reaction to changes in the envi­ronment and determination to carry out suitable modifications and adjustments to meet such changes. In a rapidly advancing world, changes are bound to take place in the techniques of production, distri­bution, and man-power management. Only an effective organization with its competent workforce can foresee such changes, and prepare itself to meet and beat their adverse effects.

Preparation to meet environmental changes may require an organization to realign and resched­ule its activities and also, perhaps, adopt an unconventional approach to its management pattern. Remember, while family-run companies generally appoint only family members to senior manage­ment positions, there are companies like Infosys and Ranbaxy, which have chosen professionals from outside to manage them.

(4) Aid to Initiative—Encouraging People who Think Differently:

For an organization to remain effective, it is necessary that it encourages initiative and innovation on the part of its workforce. Then alone, it can spot talent and creativity among them and arrange proper learning and training for them. Remember Ramanujam, who would solve complex mathematical prob­lems without knowing or explaining how he did it? Prime Minister Jawaharlal Nehru discovered his genius and sent him abroad to add to his knowledge.

Yes, the organization may have well-defined policies and clearly spelt-out procedures, programs, strategies and what have you. But even in the midst of all these, employees should have an option to try out new ideas. Of course this does not mean granting freedom to workers to do what they like with their tools, but the fact remains there should not be unreasonable curbs on innovative thinking.

Organisation – Top 4 Types (With Advantages and Disadvantages): Line or Military, Functional, Line and Staff and Committee 

There are four principle types of organization with varying degree of complexity appropriate to the enterprise in terms of its size and complexity and type of product.

These four types are:

1. Line or Military Organization;

2. Functional Organization;

3. Line and Staff Organization;

4. Committee Organization.

Type # 1. Line Organization:

It is the oldest and simplest form of structure. It is also known as the ‘Military’, Traditional’, ‘Departmental’ or ‘Scalar’ type of organization.

Line functions are those which have direct responsibilities for accomplishing the objectives of the enterprise, and each person reports to only one superior immediately above him.


(i) It is simple to establish and to explain to employees;

(ii) There is a clear-cut division of authority and responsibility;

(iii) Discipline and loyalty is ensured because of unified control;

(iv) It makes for quick action and prompts decisions;

(v) It is most economical;

(vi) It is flexible, hence can be easily adjusted to changing situations.


(i) Lack of specialization;

(ii) Autocratic and therefore, arbitrary and dictatorial;

(iii) Based on personal whims and desires of the departmental heads;

(iv) Undue reliance upon the skill and personal knowledge of subordinates. There is scope for favouritism;

(v) Later on, there is resistance to changes;

(vi) Key men are loaded to the breaking point;

(vii) There is inadequacy of communication;

(viii) It is unsuitable for large-scale enterprise.

Line organization can be successfully followed:

(i) Where the scale of business is comparatively small and subordinates are not too many;

(ii) Where production is continuous;

(iii) Where the work is based on automatic machines;

(iv) Where the labour management problems are not difficult to solve;

(v) Where the work is almost of a routine nature.

Type # 2. Functional Organization:

F.W. Taylor discovered this method of dividing the work of management or control in such a way that each man in the factory should have as few functions as possible to perform.

Under this type of organization workers or subordinates, instead of coming in contact with only one immediate superior, receive daily work orders from several specialists, foremen or officers. Thus, subordinates are accountable to not only one boss but are responsible for their performance to the different bosses, to each of them in regard to specific function or functions of specialized nature.


(i) Based on expert knowledge;

(ii) Benefit of division of labour and specialization;

(iii) Highest functional efficiency;

(iv) Manual work is separated from mental work;

(v) Reduced pressure of duties;

(vi) Scope for expansion is wide.


(i) Relative lack of stability because it weakens disciplinary controls;

(ii) Need for co-ordination may involve heavy overhead expenses;

(iii) Inability to locate responsibilities may seriously affect the morale of workers through contradiction of orders, since there is no unity of command;

(iv) Overlapping g authority may give rise to friction between foreman and supervisor;

(v) Administration tends to become unwieldy and unfruitful due to the existence of too many officers managing the same group of workers;

(vi) Initiative of supervisors may become stifled and even routine work may become complicated.

Type # 3. Line and Staff Organization:

The combination of line organisation with expert staff constitutes the type of organization known as Line and Staff. In this method, the line maintains discipline and stability and staff provides expert information. The line gets out the production, the staff carries out the research, planning, scheduling, establishing of standards and recording of performance. The authority by which the staff performs these functions is delegated by the line and the performance must be acceptable to the line before action is taken.

Line and Staff system consists of specialists, research experts, method advisers etc., to each department in order to suggest improvements in operational techniques, administrative and technical economies, innovations etc. Each department is headed by a line officer who is to decide, plan, execute and control business operations on the guidelines indicated by the staff experts associated with his department.


(i) There is planned specialization and technical problems are handled by experts working along with line executives;

(ii) This organization provides chances of advancement to able employees;

(iii) Staff officers ‘talents can be utilized for training and developing subordinates’ skill;

(iv) Efficiency is increased;

(v) This organization also offers better facilities for expansion of business unit.


(i) Unless duties and responsibilities of staff members are clearly indicated by charts and manuals, there may be considerable confusion throughout the organization as to the function and positions of staff members with relation to line supervisors;

(ii) The staff may be ineffective for lack of authority to carry out its functions or for lack of intelligent backing in the application of its recommendations;

(iii) The line manager and supervisors may develop the feeling that the staff undermines their authority. This may lead to friction between them;

(iv) Although expert information and advice are available, these reach workers through line officers and thus, run the risk of misunderstanding and misinterpretation;

(v) Line supervisors, sometimes, may resent the activities of staff members, feeling that the prestige and influence of line men suffer from the presence of the specialists.

Type # 4. Committee Organization:

The theory behind the use of committees is to keep pooling of experts on problems involving several functions and this will bring better plans and policies for operation and result in better cooperation that if they were determined by the line alone The committee is generally conceived to be advisory to the line, and the final decision to put the committee recommendations into action rests with the line. In this respect, the committee may appear to be similar to the staff and may feel that it is expensive substitute for staff.


(i) There is a collective judgment;

(ii) The authority in line may get many viewpoints, novel experiences, new ideas and more productive schemes;

(iii) Decisions arrived at are impersonal and the executive is free from personal criticisms;

(iv) There is stimulus towards co-operative action and co­ordination;

(v) There is integration of interests, team spirit and high morale.


(i) The committees may be too large for constructive action;

(ii) Expensive, in time and money, waste of time and delay is the main drawback;

(iii) Need for frequent meetings and the danger of operations – Committee is regarded as superfluous organization;

(iv) Committee members often are unfamiliar with important details, and therefore, may take wrong or ineffective decisions;

(v) Compromise, instead of clear-cut decisions;

(vi) Decisions often are made to conform with what is assumed. Some executives want to enable the members to avoid direct responsibilities for any bad results;

(vii) Aggressive and outspoken members may dominate committee meetings and influence action often adversely;

(viii) There are number of psychological weaknesses-like to make irrelevant discussions-members trying to impress superiors and the tendency to jump to conclusions.

For a Committee to be Effective:

Certain fundamental principles must be followed:

(i) Number of individuals on a committee should be minimum;

(ii) The chairman of the committee should prepare the material and circulate it to members;

(iii) The chairman should control the behaviour of the members to avoid waste of time;

(iv) Meetings should be operated on a time schedule and based on agenda, etc.

Functions of the Committee:

(i) Meetings of minds;

(ii) Interchange of ideas;

(iii) Circulation of information;

(iv) Assemble facts and put them together;

(v) Analysis of operations and formulation of reports and suggestions;

(vi) Make independent and expert studies of important factors of activities;

(vii) Develop and recommend procedures for operation;

(viii) Co-ordinate relationships between operations of different departments;

(ix) Formulate standards;

(x) Act as a clearing house for inter-departmental matters.

Organisation – 9 Main Purposes

The following are the purposes of organisation:

1. To focus attention on the objectives,

2. To help the people to work effectively for attaining the objectives,

3. To establish healthy relationship between positions,

4. To define clearly the responsibilities of each position,

5. To combine and co-ordinate individual and group activities,

6. To facilitate the attainment of objectives,

7. To help management to have a control over various business functions,

8. To help employees to make their best contribution in increasing production, and

9. To ensure co-operation and team spirit among the employees.

Organisation – 17 Main Principles

The success or failure of an organisation is measured by its results. If it achieves the desired objectives, it is sound and efficient. Management experts like Taylor and Henry Fayol suggest that the success of an organisation can be ensured well if certain basic principles are observed.

The following principles will serve as a guideline for any successful organisation:

1. Unity of objectives – It is essential to establish useful objectives in every area of operation and at all levels. Then, the organisation as a whole and its various units should have clear understanding of these objectives.

2. Specialisation – There should be specialisation or division of work at all levels. The work assigned to an individual should be up to his ability, education and skill.

3. Definiteness – Every employee should have a definite place and purpose in the organisation. The powers, responsibilities and duties of every person should be clearly indicated. This will reduce the chances for misunderstanding.

4. Efficiency – The objectives of the organisation must be attained at minimum cost. An organisation is efficient when it satisfies the individual and the social needs at the lowest possible cost.

5. Span of control – It means the number of people one can supervise directly. It is impossible for a man to supervise people at work beyond a certain number. Every manager should have limited number of subordinates reporting to him directly.

Generally, the span should be narrow for complex work and wide for simple and routine work. Span should be neither too wide nor too narrow.

6. Functional definition – The duties, responsibilities and powers of every person in the organisation should be properly and clearly defined. This is necessary to avoid confusion, overlapping and conflict between the positions.

7. Scalar principle – The scalar principle states that “authority and responsibility should flow in a clear unbroken line from the highest executive to the lowest.” There should exist a chain of authority which is created by the process of delegation.

The purpose of this principle is that the subordinates must know who delegates authority to them and to whom they are responsible.

8. Balance – Every organisation should maintain a proper balance among its various departments. It means that the allocation of authorities, funds and staff must be in a balanced manner. Any particular department shall not be given any undue importance.

9. Unity of command – Each subordinate shall have only one superior who has command over him. He shall receive orders from one superior alone and shall be accountable to that superior alone. This is based on the rule that “No man can serve two masters at the same time.”

10. Simplicity – The organisation structure should be simple so that it is easily understood by each and every person. A complex organisational structure will create doubts and conflicts among persons.

There may be over-lapping and duplication of efforts. These could be avoided in a simple structure. It helps in the smooth running of the organisation.

11. Authority and responsibility – The authority and responsibility of each employee should be clearly defined. They must be co-extensive and must be equated.

12. Flexibility – It means permitting adjustments for changes in the organisation. A good organisation should be able to change and to adapt itself to new conditions.

13. Exception principle – It means that only exceptional and complicated problems are referred to the top management. The routine and day-to-day problems are solved by the lower level management.

14. Departmentation – The departmentation refers to the manner in which the activities of an organisation is divided and formed into specialized groups or departments. In other words, it deals with grouping of activities of a concern.

15. Delegation of authority – An executive cannot perform everything by himself. So he delegates some of his powers to others and gets the work done through them. Delegation reduces the work load of the executive.

16. Coordination – It means unifying the activities of a group of people. The success of an organisation depends on the managerial ability to co-ordinate the various functions.

17. Decentralization – A good organisation is one which has a decentralized management. Since there is active participation of all the employees in the decision-making process, a decentralized management can get their support in implementing the decisions.

Organisation – Top 8 Components: Vision and Mission, Output and Outcome, Tasks, Jobs, Roles and a Few Others 

Irrespective of the type of organisation, any organisation would have certain components that build it and they are linked like a chain from the vision to output/outcome. Let us call this an ‘organisation chain’ and each com­ponent ‘a link’.

Let us now have a look at the components: 

Component # 1. Vision and Mission:

A vision is a statement of intent on what you want ‘to be’ on some future day; whereas a mission is a statement of what you want ‘to do’ to reach that. For example, in the statement ‘to excel in training busi­ness leaders and be among the top 20 business schools in India’, the vision is to be among the top 20 and the mission is to excel in training business leaders. Often, there is some confusion between these terms.

Some argue that an organisation should have both vision and mission, whereas some suggest that a mission is compulsory and a vision is not mandatory. Collins and Porras, in their famous article, ‘Organisational Vision and Visionary Organisations’, argue that a good vision should have core purposes, core values, an audacious goal, and should be vividly described.

a. The core purpose of an organisation is its reason for existence— ‘provide software solutions or telecommunication service’ is an example for a core purpose. Thus, it defines the mission. In fact, it is a statement on the ‘value’ it creates for the stakeholders, particularly the customers.

b. Core values denote the organisation’s belief framework within which the core purpose is to be achieved. For instance, firm ‘A’ and ‘B’ could have the same core purpose of providing mobile telephone communication.

Firm ‘A’ may have sustainability, employee first, and customer delight as its core values; whereas, Firm ‘B’ may have sustainability, shareholder value, and customer delight as its core values. Due to the difference in core values, Firm ‘B’ might tend to enhance shareholder value at the cost of employees.

c. Audacious goals are challenging goals and have a clear time frame. It is, in fact, the vision or the ‘to be’ statement. When Firm ‘A’ has audacious goals and Firm ‘B’ has less audacious ones, Firm ‘A’ will tend to give more stretch goals to the employees than Firm ‘B’. Firm ‘A’ is also likely to put in place more rigorous selection, motivation, reward, and learning and development systems than Firm ‘B’ and these would affect the behaviour of the people.

d. Vivid description can be observed while considering Komatsu Limited of Ja­pan. The company ranks second globally in construction equipment and wants to beat Caterpillar, the leading company in the same segment. Rather than stating ‘outperform Caterpillar’ or ‘beat Caterpillar’, it opted for ‘encircle Caterpillar’, which is more catchy, challenging, inspiring, and sounds more competitive.

If you recall the vision statement of Precision Connectors, you can see that the purpose or mission is to make connectors, the core values are ‘innova­tion, quality, employee orientation, and timely delivery’ and the audacious goal is ‘to be global leader by 2030’. Vividness is created by terms such as ‘in every vehicle on earth’ and ‘envied’.

Now, some thoughts for you. Do all organisations have a vision state­ment? If not, should they have one? Can and should an individual make his/her own personal vision/mission statement, much like an organisation? Would a personal mission statement be useful and energise a person? With these thoughts at the back of our mind, let us discuss the various compo­nents of an organisation.

The components/links of an organisa­tion are the vision and mission, strategy, structure, system, process, job, and tasks. Tasks lead to the output and outcome that create value for stakeholders.

Even in a small organisation such as a consulting company with just one person, the last few links such as processes, job, tasks, and output/outcome would exist clearly. Systems, structure, and strategy may be explicit only in larger organisations though they exist in all organisations.

In other words, these become more visible when organisational complexity increases; oth­erwise, they are often implicit. If the output/outcomes and the tasks to achieve them were simple, there would be no real need for elaborate strat­egy, structure, and so on.

Here, we have turned the logical flow on its head and commenced with the output/outcome, which makes the vision real. Other components in the chain such as strategy and structure are only the means to manage the complexity involved in creating the output/out­come and connect the vision and output/outcome better. Since, outcomes/ outputs are the most critical component in an organisation, let us start with it and move towards strategy.

Component # 2. Output and Outcome:

Output is the result of the tasks executed. The con­nectors we produce, a balance sheet we make, or the marks we score in an examination are examples of output. Outputs create value and enable us to move closer to our vision. However, at times, they may be done in such a way that the output may not lead us smoothly to the envisioned state.

If we are using low quality raw material, cooking up a balance sheet, or merely mugging up and passing the examination without understanding, we may have the output; but no outcome. Outcome means that the tasks have to be delivered in the manner intended to fulfil the larger goal or vision, and not in ‘any manner’.

If you have an output and you ask the question, ‘so what difference does it make’, you will get the answer to outcomes. Output and outcomes together create value for the stakeholders.

The terms efficiency and effectiveness are also related to this concept.

a. Efficiency:

We all know that some motor cycles run 50 km per litre, whereas some others run 60 or 70 km per litre. The second category of vehicles are more fuel-efficient. The term ‘efficiency’, thus, indi­cates an input-to-output relationship, and is usually related to some measurable input/output; petrol and distance in this case.

There are different types of efficiencies. Technical efficiency measures the physi­cal input-output ratio as in this example. Similarly, if the quantum of copper wire used in a connector is reduced without any effect on functioning of a connector, it leads to technical efficiency.

Production efficiency means using as few resources as possible for the same out­put; or in other words, producing something at the lowest average cost. Process efficiency refers to modifying or eliminating the steps in a process and yet getting the same/better output. Allocation effi­ciency refers to how the resources are allocated for various tasks.

For instance, if there is shortage of power and all machines cannot be run, the Precision Connector could allocate the machine time in such a manner that delivery is not affected. Dynamic efficiency is a variant of allocation efficiency. An example would be management of labour allocation for various tasks in Precision Connectors, depending on the changes in orders.

b. Effectiveness:

Effectiveness and efficiency are differentiated using the adage, ‘efficiency is doing the thing right, and effectiveness is doing the right thing’. In reality, the term ‘effectiveness’ is rather difficult to differentiate from efficiency because they are often used as synonyms.

A process or activity may be efficient but may not contribute to the goal. In a super market with the goal of high profitability, decreasing the number of employees per square feet (input/output ratio) can lead to higher profitability, since the sell­ing expenses would be lower.

However, this may lead to lower cus­tomer satisfaction and customers patronising the outlet may tumble, lowering profitability. Here, the action which led to efficiency, worked against effectiveness.

Thus, efficiency is hard facts related to an input-output relationship, whereas effectiveness reflects how that output helps the organisation’s overall goal or its progress towards achieving the vision. The former is highly quantifi­able, whereas the latter is more tacit and less quantifiable.

Efficiency is more visible, easy to measure, and rectify, whereas effectiveness is more invisible, difficult to measure, and more complex. Efficiency has relatively lesser intertwining variables affecting it, whereas effectiveness deals with highly integrated variables whose interaction is difficult to measure and predict.

Component # 3. Tasks:

A task or an activity is the most basic entity or the atom in creating an output. If you want to make a connector, there are many tasks/activities such as twisting the cable, insulating, fixing the pin-out, packing, and so on. In smaller organisations, one person may do many activities and in larger ones, a person usually does one or a few tasks, but of highly specialised nature. Thus, for example, an accountant of a small organisation will undertake book keeping, budgeting, controlling cash, liaising with bank, and so on.

Whereas an accountant in a large organisation may take up only book keep­ing. The former is less specialised, but broader in scope, while the latter is more specialised, but narrower in scope. Most tasks are done as per prac­tices existing in an organisation, and practices vary from organisation to organisation.

The task of checking the quality of a raw material may be done at the origin by one organisation and after receiving it in the warehouse by another. Though the task is the same, the practice of checking the quality is different.

Component # 4. Jobs and Roles:

We just learnt that a person may be doing more than one task. All the tasks that a person does, put together, is called a job. In other words, a job is a basket of related activities/tasks. A person who performs these jobs is called a job occupant.

For example, an administrator in the organisation is a job occupant and is required to look after the office set­ting, office purchase, payroll, hiring of vehicles, arranging accommodation, and ensuring compliances. In order to perform the job, the job occupant would need to motivate people, act like a father figure, and advise and coach people. These are the roles (not tasks) a person plays to fulfil his/her job. Hence, we can say that a job occupant does not only tasks, but also plays some roles associated with it.

Component # 5. Processes:

The jobs we do should be in some logical order for efficient and effective output. Let us say that Precision Connectors want to purchase materials for manufacturing the connectors. They have to find suppliers, check the quality, examine the capacity to supply, negotiate and fix prices, place orders, pay advance as per the agreement, and transport the material to the company.

This is called the purchase process. Thus, a process can be defined as a series of logically ordered tasks that convert substantial input into an independent output. Each step in the purchasing process adds some value. Process is a key concept in business and the term ‘process improve­ment’ is a common term that you will hear in an organisation. Processes create value and any improvement in a process increases the value created.

Component # 6. Systems:

We studied that processes add value and convert an input into an output, using purchasing process as an example. The purchase system has some input, that is, quantity and quality of items to be purchased and this comes from the demand raised by the manufacturing system which, in turn, depends on the sales achieved by the sales system.

The output of the purchase system will be materials and this will become the input for the manufacturing system. The manufacturing system also has processes. For example, in the initiating case, the connector will be made by the processes of twisting cables, insulating, fixing pin out and so on. Finally the connector is the output.

The entire gamut of input, process, and output combined is called a system. Purchase system, manufacturing system, marketing system, and so on are examples of a system. A ‘system’ is an important concept in management because it is independent, yet interdependent.

Component # 7. Structure:

Since systems are interdependent, it is easy to conclude that these should be linked to each other; there should be some protocol on how they should operate and share information and control, and coor­dinate with each other. This is the role of structure. Structure can, there­fore, be defined as a mechanism to link systems and sub-systems to create a cohesive whole.

For instance, structure defines how the purchase system will report the arrival of materials and to whom it is to be reported, the cost incurred, and so on. Similarly, it will define to whom and how the sales system should report demand, and to whom the manufacturing system will report the demand for material and completion of manufacturing, and so on.

Coordination, cooperation, and division of labour would be impossi­ble without structure. There are four basic ways to create an organisational structure. These are pyramid or hierarchy, matrix, committee or jury, and ecologies. There is a popular adage that structure follows strategy. Since we are moving from bottom to the top, it is natural that we are discussing strategy after structure.

Component # 8. Strategy:

Precision Connector has a clear vision as given in the case and to achieve this, it has to serve a market. The company, its structure, system, processes, and so on are part and parcel of the company. Rajendra and his team can change them as they want to, as these are internal to the organisa­tion.

However, market is external and they can hardly change it. A strategy connects the firm with the external realities. Strategy can be defined as the mechanism of aligning the internal realities with the external realities to create value for stakeholders and establish competitive advantage over other similar organisations.

Strategy is also perceived as a way of creating and dis­tributing the internal resources of a firm to align it with external realities. Either way, it forms the linking pin between the external and internal reali­ties and is created by matching the strengths/weaknesses of an organisa­tion (internal factors) with the opportunities/threats that exist (external factors); often called the SWOT analysis (strengths, weaknesses, opportuni­ties, and threats).

External factors are analysed through a technique called PESTCL analysis (political, economic, social, technical, cultural, and legal) and implies that an organisation finds opportunities or threats in these fac­tors. Strategy represents a grand long-term plan to achieve the vision and is usually created for a time span of five to ten years.

The different types of strategies are:

a. Corporate Strategy is usually made by organisations, which have numer­ous businesses/companies operating under one roof. Mahindra and Mahindra has many companies such as tractors, resorts, and two- wheelers and would include long-term plans related to entering new businesses, new geographic continents, and acquiring new companies.

b. Business strategy- The strategy made by one business, for example, Mahindra’s two wheelers, is called business strategy and could pertain to its expansion, contraction, selling off, and approach to facing the market such as low cost approach or differentiation.

c. Functional strategies such as financial, marketing, or operations strate­gies, are the grand plans for these business functions. For example, the financial strategy of a business may be ‘debt-free’ or ‘debt cum equity’ or its marketing strategy could be to introduce products only in North India.

To sum up, we can say that organisations are meant to create value for stakeholders by creating outputs and outcomes. The first compo­nent/link that emerges in an organisation is the vision/mission, which in fact is a statement of the intent of the value to be created.

It may not always be in a written form when the organisation is new. The intent is converted into actual output/outcomes through a series of links created by the organ­isation. These are strategies, structures, systems, processes, and jobs. People man the jobs and undertake tasks along with machines.

People also spend most of their adult life in the organisational environment. This implies that organisations have a strong influence on the behaviour of people. In turn, people’s behaviour also affects the organisation. Therefore, understanding an organisation is an important prerequisite for understanding OB.

Organisation – 5 Important Process: Determination of Objectives, Enumeration of Activities, Classification of Activities and a Few Others

The process of organisation may well be described as the managerial function of organising. To organise is to harmonise, co-ordinate or arrange in a logical and orderly manner. The managerial function of organising consists in making a rational division of work into groups of activities and tying together the positions representing grouping of activities so as to achieve a rational, well-co-ordinated and orderly structure for the accomplishment of work.

The various steps involved in this process are:

1. Determination of Objectives:

Since organisations are built around objectives, this may well be regarded as the first step in building up an organisation. It will consist in deciding as to why the proposed organisation is to be set up and, therefore, what will be the nature of the work to be accomplished through the organisation.

For example, a business firm must decide whether it will publish books, manufacture cloth, sell machinery or run vehicles on commercial basis. On the overall enterprise objectives will depend on the immediate, the short-term and the long-term objectives and on these will depend on the work or the jobs that will have to be accomplished.

2. Enumeration of Activities:

The first step in organising group effort is the division of the total job into essential activities. The work of an industrial concern may be divided into the following major functions- (i) production, (ii) financing, (iii) purchasing, (iv) sales, and (v) personnel.

Likewise the work of a small government may be divided into such activities as- (a) maintaining good relations with foreign countries, (b) establishing and preserving law and order, (c) protecting the State against invasion, (d) arranging for finance, etc., etc.

3. Classification of Activities:

The next step will be to classify activities according to similarities and common purposes and functions and taking the human and material resources into account. For each class of activity there may be a department and for each sub class, a section of the department, and so on.

The various activities connected with production, for example, may be grouped and classified as ‘production department’ activities. In governments, there may be ministries and departments and sections, etc., based on the classification or grouping of activities.

4. Fitting Individuals into Functions:

Having determined the various parts and portions of the job to be done, the next step will be to fix suitable and well-qualified persons into these activities. This will be like fitting pegs to holes. Each person in the group will be given a specific part of the job to do and will be made responsible for it. Appointment of workers, formen, supervisors, etc., in an industrial unit and defining the responsibility of each one of them is then the next step in organising such a unit.

5. Assignment of Authority for Action:

Each member of the group of persons available for a particular part of the job, having been given the responsibility for its completion, will be able to proceed only when he has the authority to proceed with it. The delegation of authority to take steps to complete the assigned part of the job is the next step in organisation.

In our example of the industrial unit, the manager will have to pass on authority for completing the assigned work to the sectional managers and the sectional managers to others below them in the scheme of organisation drawn while fitting men into functions.

Keeping this process of the development of an organisation in view, one will find enough reason to agree with this definition of organisation- “Organisation embraces the duties of designating the departments and the personnel that are to carry on the work, defining their functions and specifying the relations that are to exist between department and individuals.”

Organisation – Organisational Relationships

Organising is mainly establishing harmonious relationships among human and physical resources in the form of a structure which may help in achieving the pre-stated goals.

Creating a humanistic structure embraces problems relating to determining the total work, its requirement of the personnel in terms of number and quality, selecting, training, remunerating, promoting and maintaining discipline and moral among the people, fixing authority and responsibility, delegation of authority and creating subordinate superior relationships as well as other thing relating to human beings and their internal relationships or that with the organisation as a whole.

On the other hand the physical or technical aspects of organisation relates to the creation of a structure to secure the objectives. The physical aspect of organisation embraces problems relating to location, buildings, layouts, machines, tools, fixtures, furniture, raw material, financing, accounting and audit. The human beings have to be provided with these physical resources in order to discharge their duties. The physical means will not achieve aims by themselves unless human beings work on them and with the help of them.

The parts of an organisation are bound together by certain relationships. From the stand point of their bases, these may be classified as – (i) formal and (ii) informal. Social psychologists, under the leadership of Elton Mayo, focused attentions on informal organisation in primary social groups. It was Chester I. Barnard who first drew a clear distinction and analysed the relationships between the formal and informal organisations.

According to him an organisation is formal when the activities of two or more persons are consciously co-ordinated towards a given objective. It is informal when the aggregate of interpersonal relationship is without conscious joint purpose, even though common or joint results may come from them. Formal organisation, he said, “Creates additional informal organisations.”

The inter-relationship of authority that cannot be charted, the unwritten rules of organisational conduct, the necessity for learning the “roper” and the patterns of behaviour that develop in any organisation are evidence of informal relationships derived in this way. Moreover, by its very nature an organisation creates many small grouping or associations which are not on the chart but which grow from departmentation. Machine-shop group, the production- engineering group, the floor group and so on.

Formal relationships are those which flow from the structure of the organisation itself. They represent a system of formally defined duty authority and responsibility that set the limits for each individual employee. He must obey orders from designed individuals and can demand obedience from similarly market out subordinates. Because of its hard and fast requirements the formal organisation tends to restrict and circumscribe an employee’s activities. It sets up boundaries, signposts and path ways which must be followed.

Informal relationships are those that develop outside the formal organisational structure. There are various undefined behavioral patterns and personal attitudes that come into operation for purposes of mutual co-operation as soon as the management action starts. In other words – what people do is because they are responsible human beings. Their actions in terms of needs and attitudes instead of procedures and regulation fall in the domain of informal relationship.

Experiments have shown that people working in the same section or small unit fall themselves into an informal group. If one of them is absent or transferred, the group behaviour is affected, as also the output of work. Informal relations in these days are no less important than the formal ones.

If they are not cordial and in its place, there prevails conflict and opposition, and the smooth working of the organisation is greatly affected, Formal relationship are of a mechanical nature whereas informal relationships are based on personal approach.

From the stand pint of the involved persons, relationship may be broadly classified as:

1. Direct

2. Functional and

3. Lateral.

1. Direct Relationships:

Direct relationships are those that exist between a superior executive and his subordinates and vice-versa. In practice they resolve themselves into relationships of instruction and compliance based on direct authority. The supervisor gives orders and the subordinates obey them or the later takes matters to him for decision and direction.

Direct relationships are illustrated by relationship between a factory manager and the departmental managers’ responsible to him, between a foreman and the workers under him, sales manager and salesmen and so on.

2. Functional Relationships:

Functional relationships are those that exist between specialist and the operation executives including top management. The functional managers who have specialised knowledge in certain technical fields, are responsible for rendering services in these fields to other parts as well as the whole of the organisation. The relationship of functional managers to others in the organisation is limited to the prescribed functions.

Of course, so far as his own subordinates are concerned each functional manager has direct relationship with them. But a personnel manager and organisation manager are bound by functional relationship with the general manager, the production manager and other in the management. The first renders specialist service in personnel matters whereas the second in methods, procedures, design of forms etc.

3. Lateral or Crosswise Relationship:

Lateral or crosswise relationship represents the working relationship of co-operation and co-ordination between executives or supervisors at the same level of management. They are of equal status or rank and may be responsible to a common supervisor or to superiors of comparable status in the organisation structure. Smooth working of the organisation calls for collaboration between them on points of material interest without referring back to the common supervisor.

Lateral relationships are maintained through regular conferences, meetings in formal committees or informal personal contacts. But committees include executives of higher level as well. While direct and functional relationships are prescribed by the organisation a structure, lateral relationships mostly arise in an informal setting.