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Organisation:
”Organisation is a mechanism or
structure that enables living things to
work effectively and efficiently together”

 An organization is a collection of people

working together in a coordinated and
structured fashion to achieve one or
more goals.
Examples????

A deliberate arrangement of people to

accomplish some specific purpose.

Concept of Organisation
 Organisation may be defined as the process of
 For the success of business the sound Organisation is
highly important.
- Identifying and grouping the work to be
performed,
 It can be characterize as the foundation upon which
the whole structure of management is built.
- defining responsibility and authority and

 Organisation is the pattern of ways in which a large

number of people engaged in a complexity of tasks, -establishing relationships for the purpose of
relate themselves to each other in systematic way and enabling people to work most effectively together in
accomplishment of mutually agreed purposes. accomplishment of objectives.

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Improtance of Organisation
 Sound organisation can contribute greatly to the
continuity and success of the enterprise.
 Facilitates Administration: A properly designed and
balanced organisation facilitates both management
and operation of the enterprise.
 Facilitate growth and diversification: Sound organisation
permits organisational elaboration.
 Optimum use of Resources: Sound organisation
structure permits optimum use of technical and
human resources. It can introduces latest
technological improvements.
- Optimum use of human efforts by placing right
person in the right position.
A sound organisation does not generate confusion.
There is less wastage and expenditure.
 It facilitates the training and managerial development
of personnel.
The process of Organisation
 It means the managerial functions of organising. The steps
are:
 Determination of Objectives:
- The objectives decide as to why the proposed organisation
be set up (purpose) and what will be nature of work to be
accomplished through the organisation.
 Deciding various activities:
- To achieve objectives, the process of organisation is divided
in to functions, sub-functions and further sub-functions to be
performed by individual.
- This avoids duplication, confusion and wastage of men,
machine, money and material.
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 The organisation structure can profoundly affect the
people of the enterprise. Proper organisation
facilitates the effective use of the manpower.
 Stimulates Creativity: Sound organisation stimulates
independent, creative thinking and initiative by
providing well defined areas of work with broad
attitude of development of new and improve d ways
of doing things.
A sound organisation leads to specialization.
A sound organisation minimizes corruption and
inefficiences.
Elements of Organisation
 Elements means the main parts or components of the
organisation are:
(a) Well defined objectives.
(b) Well organised and co-ordinated group of people.
(c) Proper division of work and labour.
(d) Clear and well defined policies and procedures.
(e) Proper division of Authority and Responsibility.
(f) An effective system of communication.
 Grouping of Activities:
- Activities of similar nature are grouped under departments,
sections or divisions.
- These may be grouped on the basis of use, co-ordination,
policy and control etc.
- There may be different departments in an enterprise like
Personnel, Purchase, Production, Finance, Sales etc.
 Assignment of responsibilities of definite persons:
- Specific job assignment are made to diferent persons for
ensuring a certainity of work performance. Right man is put
on the right job.
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 Providing physical facilities and proper environment:
- It is essential for smooth running and prosperity of the
organisation.
- Physical facilities include- Proper machinery, tools etc.
- Right environment means- Proper lighting, ventilating and
heating/cooling arrangements at the place of work,
reasonable hours of work, rest intervals, safety devices, job
security and satisfaction and above all human approach by
management.
Different Theories
(A) Classical Organisation Theory
(B) Neo-classical Organisation Theory
(C) Modern Classical Theory
 Classical Organisation Theory:
- It considers organisation as a machine and persons as
different components of that machine.
- The emphasis is on specialisation of performance and
coordination of various activities.
-It completely ignores the human aspects of organisation.
 Neo-classical organisation theory:
It has introduced the human relations approach in the theory.
 The social environment on the job affect people and are also
affected by them.
Money is only one of the motivators but not the sole.
The criticism to the theory is:
-It has limited applicability and is not suitable for all
organisations.
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Organisation Theory
 Concept:
It may be defined as study of structure, functioning,
performance of organisations and the behaviour of
groups and indiduals working in organisation.
It explains how organisations are actually designed and
it offers suggestions as how they can be constructed to
improve effectiveness.
Organisation theory helps people understand, diagnose
and respond to needs and problems of organisation.
 Criticisms of the Theory:
◦ It was mainly based on experience and not tested by
researches.
◦ Lake of universality.
◦ It assumes that organisation – a closed system-a house that,
once created will work smoothly.
◦ Static view of organisation. That the organisation is not dynamic
and it does not adopt any change whatsoever.
◦ Theory assumes human beings inert machines.
◦ The people at work can be motivated solely through economic
rewards.
◦ Neglects the human factor. Theory recognises the tasks and not
the people.
 Modern Classical Theory:
 It was developed in sixties and flourished in seventies. It
relies on empirical research.
The theory views organisation as a system and studies it in its
totality as a complex system of human interrelationships.
Appraisal of Theory:
- It considers organisation as open system. It continually
intereacts with the external environment: the basic purpose
of interaction is survival.
- The system operates in dynamic and ever changing
environment.
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Organisational structure
- In this theory the individual is viewed as complex being  No organisation can work without people.
who can be motivated in multitude of ways. Thus theory is
multi-motivated.  Organisation structure simply means the systematic
arrangement of the people working for the
organisation to achieve predefined goals.
- It is multidisciplinary in the sense that it heavily draws its
concepts from the various disciplines such as economics,
 It is concerned with the establishment of positions
sociology, engineering, psychology etc. for problem solving
and relationship between it.
and decision making.

 It is generally shown on organisation chart.

 The structure has two dimension:- horizontal and Organisation Structure

vertical.

-The horizontal dimension defines the basic

departmentation.
- It is devision of enterprise into different parts. Marketing Finance Production

 The vertical is the creation of hierarchy of superior

Selling
and subordinates, leading to the establishment of a Manu Quality Control Purchasing

managerical structure.

Assembly Tooling

Need of structure: Product Structure

 The organisation structure is designed by the
management to achieve specific goals. CEO
Corporation
 It felicitates in fixing responsibility department wise,
section wise or on individual basis.
Corporate
 It clarifies ones authority. Managers
 It promotes division of work and leads to
specialization.
Washing Machine Lighting Television
 It avoids confusion, duplication, wastage and Division Division Division
inefficiency
 It felicitates the flow of information and making from
one level to another.

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Geographic Structure Market Structure

CEO CEO
Corporation Corporation

Corporate Corporate
Managers Managers

Northern Western Southern Eastern Large Business Small Business Educational Individual
Region Region Region Region Customers Customers Institutions Customers

Organisation Chart
 It is the result of organisation design.
 It shows..
◦ The interrelationship and relative position of each
department of company.
◦ The lines of command
◦ Relationship between different managers
◦ Kind of managerial relationship
◦ Sometimes the name of manager along with the number of
persons they supervise
◦ And pin points the omission of a particular function.

Benefits of chart Committees

 It tells quickly as who is responsible for a particular function.
 It pin points the weakness of organisation.
 It can serve as a training devise and a guide in planning for
expansion.
Limitations:
- It needs frequent updating
- It shows static picture of dynamic business
- It marks definite channel through which information must
flow, shortcuts sometimes may improve the efficiency.
 Concept and Need:
It is a group of people who work collectivelly, discuss,
decide and recommend solutions to the problems
which possibly can not be solved by an individual.
In committee, ideas put forth by several persons are
pooled and offered for criticism; the ideas are developed
and thus recommendations are made as regards
procedure and policies.

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Principles Types
 The number of person in committee should depend upon
the need and be optimum.  A Standing or Permanent Committee
 Responsibility, authority, objectives and duties should be
clearly defined.  A Temporary Committee
 Agenda of committee should be prepared and
communicated to the members at least a week before
meeting.  The Commmittee in control
 Meeting should begin and end on prefixed timings.
 Problems not related to the subject-matter at hand should  The Coordiantion and Discussion Committee
not be discussed because it will simply waste time.
 The operation of the committee should be cooperative  The Advisory Committee
development.
 The committee must be dissolved after its purpose is over.

Advantages:

Types of Organisation
- A committee performs better than one or two experts.
- A committee reduces the work load of management.  Line or Military organisation
- It is especially good at innovation and brain storming.
- It is effectively used to appoint persons to fill vacant  Functional Organisation
positions in the enterprise.

 Line and Staff Organisation

 Limitations:

- Sometimes it happens that what committee finishes in a

week ,a good individual may complete in a day.
- In committee, no individual can be held responsible.
- Committee operations are slow and committees tend to
hang on for a considerable time.

Line or Military Organisation Line Organisation

 It is the simplest form of organisation.
 It is based upon relative authority and responsibility Manager
rather than on the nature and kind of operations
and activities.
 The authority flows directly from manager to Superintendent
superintendent and then workers.
 The superior gives order to the subordinates, assign
duties, dismisses and takes disciplinary action against Worker A Worker B Worker C
them.
 Small enterprise probably starts with this type.

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o Advantages: Functional Organisation

o It is simple and easy to understand and also flexible to
expand or contract.
o Clear channel of communication, with no confusion.
o It is capable of developing all round executive at the higher
levels of authority.
 Disadvantages:
 It neglects specialists.
It overloads a few key executives.
Due to lack of specialization perhaps there is more
wastage of materials and man hours.
 It was difficult to find all round persons qualified to
work at middle levels in the organisation.
 It is also a line type organisation but the difference is
that instead of one foreman there are eight
functional person, four of them located on the shop
floor and remaining in the office having equal
authority.
 Each person who is specialist in an activity is incharge
of one function.

 Advantages:
 Person is able to perform his duties in better manner.
 It uses specialists to give expert advise to workers.
 It reduces number of accidents and wastage of materials,
man and machine hours.
 Quality of work is improved.

 Disadvantages:
 It is difficult to maintain discipline as each worker is
responsible to eight persons.
 It makes industrial relationship more complex.
 Workers always remain confused about the authority and
activity of each person.

Line and Staff Organisation

 As the industry grow in size and complexity, the
executive could not perform all the functions such as R
& D, planning, legal etc.
 This requires the employing of special staff executives
to assist executives and they are known as staff.
 The staff executive relieves the executive of certain
specialized work and advise them on related matters.
 The final power and decision will remain in the hands
of executive.
 In the chart the executives are marked vertically and
staff are placed horizontally.

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 Advantages:
 Staff executive has an expert advice.
 There is no confusion and wastage of man, material and
machine hours.
 Executives are relieved from some of their loads.
o Disadvantages:
o Product cost will increase because of salaries of staff
executive.
o Executives if they start depending too much on staff
executives may lose their authority and power.
Project Organisation
 When already existing organisation finds difficulty to
cope with new situations, it decides to launch project
organisation.
 It is created when the project is big in size and
subject to high standards of performance.
 It is solely responsive to the planning, design,
development, production and support of a single
system or product.
 It consists of specialists from various departments.
 It is time limited.

A Project Organisation  Advantages:

◦ It does not interfere with the existing organisation.

President ◦ It provides concentrated attention that a complex project
demands.

Vice President  Limitations:

 Project manager has to deal with persons of varied nature

Project A Project B Project C and interest.
 Experience gained in one project may not be relavant to
other projects.
 Project work being temperary, there is insecurity of job for
specialists hired from outside.