Organisation

Concept of organization

 Organization management refers to the art of getting people together on a common

platform to make them work towards a common predefined goal.
 Organization management enables the optimum use of resources through meticulous
planning and control at the workplace.
 Organization management gives a sense of direction to the employees. The
individuals are well aware of their roles and responsibilities and know what they are
supposed to do in the organization.

Importance of organization

1. Facilitates Administration
2. Facilitates Growth and Diversification
3. Permits optimum use of resources
4. Stimulate creativity
5. Encourage Synergy effects
6. Transfer and adaption of technology

Process of organization

1. Determination of objectives

2. Identification and grouping of activities

3. Allotment of duties

4. Developing relationship

5. Integration of activities

Types of organizational structures

The type of structure adopted by an organization will vary with the nature and types of activities
performed by an origination. The organizational structure can be classified under two categories which
are as follows:
(i) Functional structure and
(ii) Divisional structure

Advantages: The functional structure has many advantages to offer. Important among them are as
follows:
(a) A functional structure leads to occupational specialization since emphasis is placed on specific
functions. This promotes efficiency in utilization of manpower as employees perform similar tasks within
a department and are able to improve performance.
(b) It promotes control and coordination within a department because of similarity in the tasks being
performed.
(c) It helps in increasing managerial and operational efficiency and this result in increased profit.
(d) It leads to minimal duplication of effort which results in economies of scale and this lowers cost.
(e) It makes training of employees easier as the focus is only on a limited range of skills.
(f) It ensures that different functions get due attention.
Disadvantages: The functional structure has certain disadvantages which an organization must take into
consideration before it adopts it. Some of them are as follows:
(a) A functional structure places less emphasis on overall enterprise objectives than the objectives
pursued by a functional head. Such practices may lead to functional empires wherein the importance of a
particular function may be overemphasized. Pursuing departmental interests at the cost of organizational
interests can also hinder the interaction between two or more departments.
(b) It may lead to problems in since there may be a duplication of activities across products.

Formal Informal

Line Functional Line & staff Project management Matrix

Formal organization: Formal organisation refers to the organisation structure whichis designed by
the management to accomplish a particular task. It specifies clearly the boundaries of authority and
responsibility and there is a systematic coordination among the various activities to achieve organisational
goals.
The structure in a formal organisation can be functional or divisional. The formal organisation can be
better understood by a study of its features which are as follows:
(a) It specifies the relationships among various job positions and the nature of their inter-relationship.
This clarifies who has to report to whom.
(b) It is a means to achieve the objectives specified in the plans, as it lays down rules and procedures
essential for their achievement.
(c) Efforts of various departments are coordinated, interlinked and integrated through the formal
organisation.
(d) It is deliberately designed by the top management to facilitate the smooth functioning of the
organisation.

Advantages: Formal organisation offers many advantages. Some of the important ones are:
(a) It is easier to fix responsibility since mutual relationships are clearly defined.
(b) There is no ambiguity in the role that each member has to play as duties are specified. This also helps
in avoiding duplication of effort.
(c) Unity of command is maintained through an established chain of command.
(d) It leads to effective accomplishment of goals by providing a framework for the operations to be
performed and ensuring that each employee knows the role he has to play.
(e) It provides stability to the organisation. This is because behaviour of employees can be fairly predicted
since there are specific rules to guide them.
Limitations: The formal organisation suffers from the following limitations:
(a) The formal communication may lead to procedural delays as theestablished chain of command has to
be followed which increases the time taken for decision making.
(b) Poor organisation practices may not provide adequate recognition to creative talent, since it does not
allow any deviations from rigidly laid down polices.
(c) It is difficult to understand all human relationships in an enterprise as it places more emphasis on
structure and work. Hence, the formal organisation does not provide a complete picture of how an
organisation works.
Informal Organisation
Interaction among people at work gives rise to a ‘network of social relationships among employees’
called the informal organisation.
Informal organisation emerges from within the formal organisation when people interact beyond their
officially defined roles. When people have frequent contacts they cannot be forced into a rigid formal
structure. Rather, based on their interaction and friendship they tend to form groups which show
conformity in terms of interest. Examples of such groups formed with common interest may be those who
take part in cricket matches on Sundays, meet in the cafeteria for coffee, are interested in dramatics etc.
Informal organisation has no written rules, is fluid in form and scope and does not have fixed lines of
communication. The Table in the next page compares informal organisation with the formal organisation
to provide better understanding of both types.
Informal organisation can be better understood with the help of the following features:
(a) An informal organization originates from within the formal organisation as a result of personal
interaction among employees.
(b) The standards of behavior evolve from group norms rather than officially laid down rules and
regulations.
(c) Independent channels of communication without specified direction of flow of information are
developed by group members.
(d) It emerges spontaneously and is not deliberately created by the management.

(e) It has no definite structure or form because it is a complex network of social relationships among
member.

1. LINE ORGANISATION: It is oldest pattern of organization. Line functions are those which
have direct responsibility for accomplishment the objectives of the enterprises. This
form of organization is also called military organization or scalar type of organization.
2. Functional organization: The classic organizational structure where the employees are
grouped hierarchically, managed through clear lines of authority, and report ultimately to
one top person.