ORGANISATION

• Organization refers to a collection of people, who are involved

in pursuing defined objectives.

• The organization encompasses division of work among

employees and alignment of tasks towards the ultimate goal
of the company.

• 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
Formal Organisation:
• A group of people working together cooperatively under
authority towards goals that mutually benefit the participants
and the organisation.
• It is a system of well defined jobs each bearing a definite
measures of authority, responsibility and accountability.
• The managers describe organisational relationships in written and
graphic forms.
• He tells the participants to do the task in specified manner or
obey orders from designated individuals and to work
cooperatively with others.
• It is believed that stable and consistent relationships promote
order and facilitate planning and controlling functions.
• In formal organisations people work towards common
goals.
• They constantly communicate with each other in order to
achieve targets assigned to them.
• They are willing to abide by rules and regulations and carry
out work as dictated by their respective superiors.
• This structure consists of officially designated relationships
between people working at various levels.
• It is structure of well defined jobs each bearing a definite
measure of authority, responsibility and accountability.
• The formal structure is deliberately created to achieve
results. Formal organisation is a system of consciously
coordinated activities of two or more persons towards a
common objective.
• Formal organisations are build around positions not people.
These positions prescribe duties, activities and authority
relationships.
Informal Group
• The informal organisation can be viewed as a shadow
organisation.
• It arouses naturally and spontaneously from the
interaction of people.
• It refers to unofficial and unauthorised relationships
that inevitably occur between individuals, groups within
the formal organisations
• It exists within the confines of the formal authority
structure.
• It is a by product of human nature and is affected by
formal structure.
• Membership is voluntary, they evolve gradually
among employees with common interest.
• A group of junior commercial loan officers in a bank
might constitute an informal work group. They might
meet over lunch regularly to discuss common
problems or to share work related information.
Advantages of Informal groups:
• Benefits to work groups: it protects the individual against the
arbitrary treatment by management.

• Support Formal Structure: formal structure can not meet every

problems in dynamic situations because they are pre
established and partly flexible. Hence some requirements can
be better meet by informal structure.
Useful Communication device:
• The informal organisation provides the management with an
additional channel of communication in the form of grapevine.
By utilising grapevine within formal structure, management can
transit accurate and useful information to employees quickly.
Why informal groups emerge?

• Warmth and support

• Power: what can not be achieved individually could

be obtained through joint and coordinated efforts.
Membership in the informal groups enhances the
bargaining power of the members.
Affiliation: members satisfy their social need on a regular basis.
Security: It is better to join a group rather than standing alone.
Groups assist in solving work related problems and also to
mitigate against stressful or demanding condition.
Recognition: The work group is a primary source of recognition
and esteem for many individuals.
Proximity: People tend to form groups with people who either
live or work in close proximity to each other, generally
belonging to the same work area.
Goal accomplishment: the groups can help the members in
solving the work related problems hence preventing the
individuals committing mistakes.
 Formal vs Informal Organisations
Origin:

• Formal organisation are goals oriented. Formal organisations are

tightly held around the general principle of the organisations.
• Informal organizations reflect individual rather than
organisational goal.
• Changes in formal organisations occur through administrative
policies whereas changes in informal organisations occur
collective agreements between the members.
Structural Component:

• Formal organisations have a definite structure reflected in

the organisations charts providing a pictorial representation
of authority relationships.

• These organisation charts are build around positions and

exhibit official relations.

• These organisations tend to be mechanical and impersonal.

• Informal organisations are built around people. They are
structure less and initiated by the workers.

• The basic purpose is to improve human relationships.

Goals:
• Formal organisations are wedded to well defined goals
created by management. These goals may be to enhance
profit, improve market share etc.
• The basic purpose of informal organisations can be broadly
defined as the social satisfaction of the members.
Influence Process:
• In formal organisations, positions are the centre of power and
influence.
• Authority is equated with influence. People enjoying authority
are supposed to be powerful.
• Influence in the informal organisations is attached to the
persons. The individual with the most influence is the person
who is most able to satisfy the needs of the group.
Control process:
• Formal organisations are tied to the rigid system of rules and
regulations.

• Control points are establish to constrain behaviour, restrain the

members going off the track.

• Informal organisations are nor glued to any rigid system of rules

but are governed by group norms.
Communication:

• Formal organisations depend on formal, official channels of

communication to sell the ideas to the organisation members.

• Communication is one way in case of formal organisations to convey

the feelings of management to the workers.

• The informal organisation designs kits own channel of communication.

• In case of informal organisations many time grapevine spread the

rumours.
Size:

• Formal organisation tends to be large in size and generally

unmanageable.

• Informal organisations tend to be small and manageable.

Line and Staff Relationship
Line Organisation

• Line or military organisation is the simple and the oldest form of

organisation.

• Line structure are more common in small scale units.

• Authority flows in a direct line from superiors to subordinates.

• Each employees knows who his superior is and who has the
authority to issue orders.
• The ‘one man one boss’ principle is strictly applied in such kind of
organisations.
• Managers have full authority in his own areas of operations and
are responsible for final results.
• Similarly each subordinate is directly responsible for the
performance of assigned duties.
• If the subordinates fail to carry out reasonable orders the
superior has the right to take disciplinary action.
• Thus authority flows downward and responsibility flows
upwards throughout the organisation.

• The essential feature of line organisation is flow of authority

which is straight and vertical.

• As it is directly associated with the attainment of primary

objectives of the organisation, hence this kind of authority is
also known as direct authority.
 President

VP Sales VP Production VP Finance

Production Production
Supervisor Supervisor 2
 Advantages

Simple: it is simple to establish and easy to explain the employees. It is also easy to
understand and follow.

Fixed responsibility: Responsibility is fixed. Each person knows who his superior is
and who has authority to issue order.

Quick decision: As all activities under one department is controlled by one

executive, and the direct line of authority eliminates a considerable amount of
bureaucratic buck passing, thus a line organisation helps to take quick decisions.
Develop Managers: The line manager is responsible for results.

• Non performers may mean demotions, hence to survives he

has to accomplish the tasks.

Flexibility: each executives has full freedom to make decisions.

In his area of command.

• This enables him to adjust policies and procedures to the

changing needs.
Economical: A line organisation is economical for a small
business as no specialists are needed and a limited number of
executives are required.
Disadvantages:
• Lack of specialisation: with growth of diversification,
organisational problems multiply in number.

• Factors like changing economic condition, technological

innovation and growing competition may make the executives
find it extremely difficult to process bundles of data and take
appropriate decisions.
Scarce talent:
• Capable line executives who can look after diverse activities are
rare.
• With growth the manager’s duties too continue to expand.
• Working under time and cost constraints managers may
overlook and ignore important activities.
Arbitrary Actions:
• Line organisations are based on the one man management
principle.
• Nepotism and favouritism may prevail in selection, recruitment,
promotion etc.
Difficult to Coordinate:
• Broad organisational objectives may be scarified to meet narrow
sectional interest as every mangers may mange his departments at
the cost of other departments.
Functional Organisation:
• The basic aim of functional organisation is to simplify the
complexity and grouping all the work to be done into major
functional departments.
• Activities are grouped together by common functions.
• It is organising work into related bundles of skills.
Line and Staff Organisations:
• The line and staff organisations have combined the
good features of both line organisations and functional
organisation.
• The staff specialists provide advice and support to the
line managers in getting the work done.
• Staff specialists concentrate a narrow portion of the
firm’s activities.
• However, their authority is purely advisory not
functional.
• When the staff organisation is superimposed on the
line organisation, the result is a line and staff
organisation.

• The line organisation is paramount and the staff

organisation is created to service it.
• The role of staff is considered as service to managers.
• It is characterised by two features: it provides service to
the line and it is devoid of the right to command.
• On the other hand line authority is characterised by
right to decide and the right to direct.
• Line element have a direct responsibility of
accomplishment of the objective of an enterprise.
• They have the ultimate authority to command, act,
decide, approve or disapprove of all organisational
activities.
Advantages:
• Planned Specialisation: Line employees can handle their workloads with
the expertise knowledge of the staffs.
• Scientific Actions: The actions of a line mangers can become more scientific by
means of skillful examination of business problems.
• The staff employees share the responsibility of gathering information about the
field, which allows line members to focus on attaining the company's purpose.
• Definiteness: In a line and staff organization, authority and responsibility are
fixed. The unity of command is honoured as each individual reports to only one
superior, while specialized help is available as and when required. In addition,
accountability is definite. Only line executives are accountable for their result of
their department.