TYPES OF

ORGANIZATION
 Organization is a formalized intentional structure of
roles and positions.
 Organization is an identified group of people
contributing their efforts towards the attainment of
goals.
 Organization is a harmonious adjustment of
specialized parts for the accomplish of some common
purpose.
 Formal Organization means the

intentional structure of roles in a

formally organized enterprise.

 Formal Organization refers to the structure of well defined
jobs, each bearing a definite measure of authority,
responsibility and accountability.
 In formal Organization, Each & every person is assigned the
duties, authority , responsibilities & relationship as prescribed
by the top management.
 Advantages
(1) Optimum use of resources
(2) Job Satisfaction
(3) Motivating Employees
(4) Facilitating Management Action
Disadvantages
(1) Doesn’t allow flexibility
(2) Doesn’t allow long term planning
(3) Limited scope of Creativity
 Informal Organization means a network

of interpersonal relationships that arise

when people associate with each other.

 Informal Organization means natural grouping of
people in the work situation.
 Informal Organization is a network of personal and
social relations not established or required by the
formal organization but arising spontaneously as
To the Employees:

(1) Job Satisfaction.

(2) Earn sympathy; guidance & advice.

(3) Get help in critical situation.

(4) Atmosphere favorable to research is built.

(5) Social control on members

(6) If a manager tries to misuse his powers, informal organization puts a

check on him.
To the Managers:

(1) Reduces burden.

(2) If manager is weak, informal group come to his help.

(3) Helps formal organization in realizing its objectives.

(4) Additional means of effective & quick

communication.
(1) Rumors spread swiftly.

(2) It oppose change.

(3)Individuals personal need may go unsatisfied.

(4)Members have to observe norms & values.

(5) Gives importance to group relation which sometimes

challenge the authority of the management

(6) Group leaders sometimes uses group influence to promote

his personal ends
 Basis of Formal Organization Informal Organization
Distinction
Purpose It is created to achieve pre It has no pre determined
determined objective objectives. It arises due to
social interaction of people.
Formation Formal relations are well Informal relations are
planned and are created unplanned and they
deliberately. originate automatically.
Structure Well structured Unstructured
Nature Official Unofficial
Focus Positions Persons
Source of Power Delegated Given by group
Leadership Managers Informal Leader
Source of control Reward/Punishment Social Sanctions
 Basis of Formal Organization Informal Organization
Distinction
Guidelines for Rules and Procedures Group Norms
behavior

Stability Stable (Long term) Unstable (Short term)

Size large Small

Flexibility Rigid Structure Highly flexible

Communication Chain of command Grapevine

 Organization Structure refers to the hierarchical
arrangement of various positions in the organization.
 Organization Structure defines the relationship
between various positions, departments and persons.
 Organization Structure helps in allocating authority
and responsibility formally and decides who is to
report to whom, who is superior to whom and who
are his subordinates.
There are basic Four types of organization structure,
which are more popular in the business word. These
are;
(1) Line Organization
(2) Functional/Staff Organization
(3) Line and Staff Organization
(4) Committee Organization
Business unit is organized not according to functions,
but on the basis of responsibility and authority.

Authority flows from the top to the bottom in a line,

the responsibility flows in the opposite direction from
the bottom to top. So it is known as line organization.
Simplicity
Fixed authority and responsibility
Discipline
Quick decision-making
Development of skill
Effectiveness
Chances of success
Easy location of responsibility
Flexibility
Lack of all rounders
Overloading
Difficulties in departmentation
Difficulties in co operation & co ordination
Lack of specialization
Centralization of authority
Neglect of planning & research
Corruption
Difficulties of transfer
The whole task of management is divided according
to the type of function involved. Every person has to
perform a special function under this organization. So
it is called staff organization.
Specialization
Benefits of large scale production
Scientific recruitment and training
Co-operation
Decentralization of authority
Easy expansion
Flexibility
Expensive
Violation of Unity of command
Difficult to locate responsibilities
Lack of discipline & control
Absence of quick decision
Difficulties of co ordination
Increase in clerical work
Line officials do administrative work as usual, but
they are assisted by the experts. This group of experts
is known as ‘staff’.

Line officers have the authority to issue orders while

staff experts have the authority to give advice and
instructions.
Simplicity
Balance
Co-ordination
Prompt Decision
Less Burden on Line Officers
Blending of Abilities of Line Officers and Experts
 Flexibility
Location of Responsibilities
Conflict among officials
Evading responsibility
Expensive
Disregard for line officers suggestion
Carelessness of line officers
Conflict between old & new
The above three forms of organization cannot fully
satisfy the requirements of modern business. Hence
to supplement them, committee organisation began
to be adopted.
Dr. Terry has defined committee as a “body of
persons elected or appointed to meet on an organized
basis for the discussion and dealing of matters
brought before it.”
 This pattern of organization is gradually gaining
importance and popularity.
 The committee organization is being used in the line
and staff organization to keep the head of every
department fully informed of the activities of the
other department heads.
 The committee organization has been in use in the
business units both in the private and public sector.
 It is widely used also in education, religious and social
institution as also in hospitals and minicipal
corporation.
Best means of group deliberation
Decentralization of authority
Co operation
Co ordination
Matured decisions
Useful for training
Improvement in labor relations
Continuity in managerial policy
Helpful to research
Helpful to administrative officers
Helpful to communication
Delay in decision making
Injustice to minorities
Business secrets
Difficulty of fixing responsibility
Laxity in organization
conflict & bitterness
Expensive