Organization

Meaning

An entrepreneur organizes various factors of production like land, labour,

capital, machinery, etc., for producing products. The product finally reaches
consumers through various agencies. All these business activities are divided into
various functions and these functions are assigned to different individuals. Various
individual efforts must lead to the achievement of common business goals.

Organization is the structural framework of duties and responsibilities

required of personnel in performing various functions with a view to achieve
business goals through organization. Management tries to combine various business
activities to accomplish predetermined goals.

Present business system is very complex and competitive. Various jobs are
to be performed by persons most suitable for them. First of all various activities
should be grouped into different functions. The authority and responsibility is fixed
at various levels. All efforts should be made to co-ordinate different activities for
running the units efficiently.

Definitions:

Louis Allen, “Organization is the process of identifying and grouping 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.”

Koontz and O’Donnell, ‘The establishment of authority relationships with

provision for co-ordination between them, both vertically and horizontally in the
enterprise structure.”

George Terry, “Organising is the establishing of effective authority relationships

among selected work, persons, and work places in order for the group to work
together efficiently”.

Different authors look at the word ‘organisation’ from their own angle. One
thing which is common in all the viewpoints is that organisation is the
establishment of authority relationship among persons so that it helps in the
achievement of organisational objectives.
Some of the characteristics of organisation are:

1. Division of Work:

Organisation deals with the whole task of business. The total work of the
enterprise is divided into activities and functions. Various activities are assigned to
different persons for their efficient accomplishment. This brings in division of
labour. Specialisation in different activities is necessary to improve one’s
efficiency. Organisation helps in dividing the work into related activities so that
they are assigned to different individuals.

2. Co-Ordination:
Co-ordination of various activities is as essential as their division. It helps in
integrating and harmonising various activities. Co-ordination also avoids
duplications and delays. In fact, various functions in an organisation depend upon
one another and the performance of one influences the other. Unless all of them are
properly coordinated, the performance of all segments is adversely affected.

3. Common Objectives:
All organisational structure is a means towards the achievement of enterprise
goals. The goals of various segments lead to the achievement of major business
goals. The organisational structure should build around common and clear cut
objectives. This will help in their proper accomplishment.

4. Co-operative Relationship:
An organisation creates co-operative relationship among various members of
the group. An organisation cannot be constituted by one person. It requires at least
two or more persons. Organisation is a system which helps in creating meaningful
relationship among persons. The relationship should be both vertical and horizontal
among members of various departments. The structure should be designed that it
motivates people to perform their part of work together.

5. Well-Defined Authority-Responsibility Relationships:

An organisation consists of various positions arranged in a hierarchy with well
defined authority and responsibility. There is always a central authority from which
a chain of authority relationship stretches throughout the organisation. The
hierarchy of positions defines the lines of communication and pattern of
relationships.
Principles of Organisation

1. Objectives---The objectives of the organisation should be clearly defined. Every

individual in the organisation should understand these objectives. This will enable
them to work efficiently and help the organisation to achieve its objectives.

2. Specialisation----Every individual in the organisation should be asked to

perform only one type of function (work). This function should be related to his
educational background, training, work-experience, ability, etc., in other words,
there should be a division of work and specialization in the organisation. This will
increase the efficiency, productivity and profitability of the organisation.

3. Co-ordination---The efforts of all the individuals, departments, levels, etc.

should be coordinated towards the common objectives of the organisation.
Therefore, managers must try to achieve co-ordination.

4. Authority--Every individual should be given authority (power) to perform his

responsibilities (duties). This authority should be clearly defined. Authority
should be maximum at the top level and it should decrease towards the lower
levels. There should be a clear line of authority which joins all the members of the
organisation from top to bottom. This line of authority should not be broken. It
should be short, i.e. there should be few levels of management.

5. Responsibility---The responsibility (duties) of every individual should be

clearly defined. This responsibility is absolute, i.e. it cannot be delegated. The
responsibility given to an individual should be equal to the authority given
to him.

6. Span of Control---Span of control means the maximum number of

subordinates which one superior can manage effectively. The span of control
should be as small as possible. Generally, at the top level, the span of control
should be 1:6, while at the lower level, it should be 1:20. Span of control
depends on many factors such as nature of job, ability of superior, skill of
subordinate, etc.

7. Balance--There should be a proper balance between the different levels,

functions and departments of the organisation. Similarly, there should be a proper
balance between centralisation and decentralisation, authority and
responsibility, etc. If there is no balance between these factors then the
organisation will not function smoothly.

8. Chain of Command--The chain of command should be very short. That is, there
should be very few levels of management. If not, there will be many
communication problems and delays in execution of workflow.
9. Delegation----Authority and responsibility should be delegated to the
lowest levels of the organisation. Therefore, the decisions can be made at the
lowest competent level. The authority delegated to an individual should be
equal to his responsibility.

10. Continuity---The enterprise should be able to use the designed organisation

structure for a long period of time. The organisation structure should be able to
achieve not only present objectives but also future objectives of the
enterprise.

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