Unit-3
Meaning
The term 'Organisation' is derived from the word 'organism' which means a structure of body divided into parts that are held together by a fabric of relationship as one organic whole.
In simple words, organizing means arranging the ways and means for the execution of business plan. It is the creation of administrative set-up for the execution of the plan.
Importance of Organisation
1. Ensures optimum utilisation of human resources:
Every enterprise appoints employees for the conduct of various business activities and operations. They are given the work according to their qualifications and experience. Organisation ensures that every individual. Is placed on the job for which he is best suited.
2. Facilitates coordination:
It acts as a means of bringing coordination and integration among the activities of individuals and departments of the enterprise. It establishes clear-cut relationships between operating departments and brings proper balance in their activities.
3. Facilitates division of work:
Different departments are created for division of work, specialization and orderly working of the enterprise. Similarly, delegation relieves top level managers from routine duties.
4. Ensures growth, expansion and diversification:
Sound Organisation structure facilitates expansion/diversification of an enterprise. Organisation structure has in-built capacity to absorb additional activities and also effective control on them. A business enterprise brings diversification in its activities within the framework of its Organisation.
5. Stimulates creativity:
Organisation provides training and self-development facilities to managers and subordinates through delegation and departmentation. It also encourages initiative and creative thinking on the part of managers and others.
6. Facilitates administration:
Effective administration of business will not be possible without the support of sound organisation structure. Delegation, departmentation and decentralisation are the tools for effective administration.
7. Determines optimum use of technology:
Sound Organisation structure provides opportunities to make optimum use of technology. It facilitates proper maintenance of equipment and also meets high cost of installation.
8. Determines individual responsibility:
Responsibility is an obligation to perform an assigned work. In a sound Organisation, the manager finds it easy to pinpoint individual responsibility when the work is spoilt.
Stages 0r Steps in the Process of Organisation
1. Fixing the objectives of the organisation
At the top level, administrative management first fixes the common objectives of organisation. At the middle level, executive management fix the departmental objectives. Lastly, at the lower level, supervisory management fix the day-to-day objectives. All the objectives of the organisation must be specific and realistic.
2. Finding activities must for achieving objectives
After fixing the objectives, the top-level management prepares a list of different activities (or works) which are required to be carried out for achieving these objectives. This list is prepared at random without following any sequence or order. This is a very important step because it helps to avoid duplication, overlapping and wastage of efforts.
3. Grouping the similar activities
All similar or related activities having a common purpose are grouped together to make departments. For e.g. all activities or works which are directly or indirectly connected with purchasing are grouped together to make the Purchase Department. So various departments such as Purchase, Production, Marketing, Finance, etc. are made. The grouping of similar activities leads to division of labour and specialisation
4. Defining responsibilities of each employee
The responsibilities (duties) of each employee are clearly defined. This will result in the selection of a right person for the right post / job. He / she will know exactly what to do and what not to do. Therefore, it will result in efficiency.
5. Delegating authority to employees
Each employee is delegated (surrender or given) authority. Without authority, the employees cannot carry out their responsibilities. Authority is the right to give orders and the power to get obedience. The authority given to an employee should be equal to the responsibility given to him.
6. Defining authority relationship
When two or more persons work together for a common goal, it becomes necessary to clearly define the authority relationship between them. Each person should know who is his superior, from who he should take orders, and to whom he will be answerable. Similarly, each superior should know what authority he has over his subordinates.
7. Providing employees all required resources
After defining the authority relationships, the employees are provided with all the material and financial resources, which are required for achieving the objectives of the organisation. So in this step, the employees actually start working for a common goal.
8. Coordinating efforts of all to achieve goals
This is the last stage or step in the process of organisation. Here, the efforts of all the individuals, groups, departments, etc. are brought together and co-coordinated towards the common objectives of the organisation.
Formal and Informal organization
1. Meaning
Formal Organisation is formed when two or more persons come together. They have a common objective or goal. They are willing to work together to achieve this similar objective.
Formal Organisation has its own rules and regulation. These rules must be followed by the members (employees and managers). A formal organisation has a system of co-ordination. It also has a system of authority. It has a clear superior-subordinate relationship. Examples of formal organisation are:- a company, a school, a college, a bank, etc.
Informal Organisation exists within the formal organisation. An informal organisation is a network of personal and social relationships. People working in a formal organisation meet and interact regularly. They work, travel, and eat together. Therefore, they become good friends and companions. There are many groups of friends in a formal organisation. These groups are called informal organisation.An informal organisation does not have its own rules and regulation.
Distinction Between Formal and Informal organizations
Formal organisationInformal organisation
1.It is created deliberately and is consciously It is natural and arises planned. spontaneously.
2. It is based on delegation of authority and It arises on account of social may grow to immense size. interaction of people and tends
to remain small
3. It is deliberately impersonal and the It is personal with emphasis emphasis is on authority and functions. on people and their relationship.
4. Rules, duties and responsibilities are . It has unwritten rules and and written clearly defined. traditions.
5. It is shown on the organisation chart It has no place in the chart . It cuts across formal channels.
6. It provides for division of labour and It is structure less and has a definite structure. develops out of social contacts .
7. Formal authority is attached to a position. Informal authority attaches to a . person
8. Formal authority flows downwards Informal authority flows . upwards of horizontally.
9. Formal organisation is created to meet Informal organisation arises organisational goals. from man’s quest for social . satisfaction.
10. It is permanent and stable. Itis relativelyfickle& unstable
2. Formed by Whom?
A formal organisation is formed by the top level management.
An informal organisation is formed by social forces within the formal organisation.
3. Rules and Regulations
The members of a formal organisation have to follow certain rules and regulations. These rules are available in writing (documented). They are made by a formal authority (superiors). If the members follow these rules properly, then they will be rewarded. However, if they do not follow these rules, they will be punished.
The members of an informal organisation do not have to follow any rules and regulations.
4. Duties and Responsibilities
In a formal organisation, the duties, responsibilities, authority and accountability of each member is well-defined.
In an informal organisation, there are no fixed duties, responsibilities, authority, accountability, etc. for the members.
5. Objectives or Goals
In a formal organisation, the objectives or goals are specific and well-defined. The main objectives of a formal organisation are productivity, growth, and expansion.
In an informal organisation, the objectives are not specific and well-defined. The main objectives of an informal organisation are friendship, security, common interest, individual and group satisfaction, etc.
6. Stability
A formal organisation is stable.
An informal organisation is not stable.
7. Channels of Communication
A formal organisation uses formal channels of communication.
An informal organisation uses informal channels of communication (i.e. grapevine)
8. Organisation Chart
A formal organisation is shown on the organisation chart.
An informal organisation is not shown on the organisation chart.
9. Superior-Subordinate Relationship
In a formal organisation, there exist a superior-subordinate relationship.
In an informal organisation, there is no such superior-subordinate relationship.
10. Benefits for Members
The members of the formal organisation get financial benefits and perks like wages or salaries, bonus, travelling allowances, health insurance, etc.
The members of informal organisation get social and personal benefits like friend circle, community, groups, etc.
Organization as a Structure
The term organisation can be studied as a structure and also as a process. In a static sense, organisation is a structure. A group of people functions within this structure and try to accomplish certain objectives. Organisation is a structure for the conduct of business activities efficiently.
In the words of Kast and Rosenzweig, "structure is the established pattern of relationships among the component parts of the organisation". In this sense, Organisation structure refers to the network of relationships among individuals and positions in an Organisation.
Types of Organisation Structure
Organisation structure is defined as "The logical arrangement of task and the network of relationships and roles among the various positions established to carry out the activities necessary to achieve the predetermined objectives of business".
Internal Organisation structures can be broadly classified into the following types/forms:
- Line Organisation structure.
- Functional Organisation structure.
- Line and staff Organisation structure.
- Committee and Matrix Organisationstructure.
Line Organisation Structure
Line Organisation (also called Military/Scalar Organisation) is the oldest and the simplest form of internal Organisation structure. It was first developed by the Roman army and later adopted by armies all over the world.
In the line Organisation, the line of authority moves directly from the top level to the lowest level in a step-by-step manner. It is straight and vertical. The top-level management takes all major decisions and issues directions for actual execution. The general manager, for example, issues order to various departmental managers. Thereafter, the departmental manager issues instructions to works manager. The works manager will issue instructions to foreman.
Line Organisation structure is given in the following chart:
Advantages of Line Organisation Structure
Simplicity:
Line Organisation structure is easy to understand and follow by superiors and subordinates. It is simple and clear as regards authority and accountability.
Prompt decisions:
Line Organisation facilitates prompt decision-making at all levels as the authority given is clear and complete.
Discipline:
It brings discipline in the Organisation due to unity of command, delegation of authority and direct accountability.
Economical:
Line Organisation is economical as experts are not appointed.
Attraction to talented persons:
Line Organisation brings out talented workers and develops in them quality of leadership. It offers opportunities of self-development to employees.
Quick communication, high efficiency, flexibility and high employee morale are some more advantages of line Organisation structure.
Limitations of Line Organisation Structure
Heavy burden on line executives:
The line executives are given too many duties and responsibilities. Even the quality of the decisions of executives may suffer due to heavy burden of duties and responsibilities.
Non-availability of services of experts:
There is absence of skilled experts in line organisation. Expert assistance is not available promptly when needed by line executives.
Favoritism:
There is wide scope for favoritism and nepotism in the line organisation. Leadership of departmental executive is autocratic due to heavy concentration of powers. He may favour some employees at the cost of others.
Too much dependence on limited executives:
In the line organisation, all powers are concentrated in the hands of a few executives. Naturally, the success and stability of the entire organisation depends on their personal skill, initiative and interest. Special difficulties arise when one executive is to be transferred/replaced/promoted.
Rigidity:
There is rigidity in the working of line organisation.
Delays in communication, limited freedom to employees and unsuitabilityto modern large business units are some more demerits of line Organisation.
Functional Organisation Structure
F.W.Taylor, founder of scientific management, conceived the functional Organisation structure. According to him, it is unscientific to overload a foramen with the entire responsibility of running a department. He introduced a system of functional foremanship in his Organisation. In his functional foremanship, there will be eight specialists' foremen who will be required to guide, direct and control the work. Workers at the plant level will have to follow the instructions of all these eight specialists called bosses.
In the functional foremanship, there will be eight specialists/functional heads called bosses. Out of eight bosses, four bosses will be at the planning level and the remaining four will be at the shop floor level.
Taylor's functional foremanship consists of two groups of supervisors :-
- At the Planning Level or Office Level.
- At the Doing Level or Factory Level.
(a) At the Planning Level :-
Taylor separated planning from doing. At the planning level there were four supervisors. They are :-
- Time and Cost Clerk : This boss prepares the standard time for completing the work and cost of doing that work.
- Route Clerk : This boss makes the exact route (way) through which each product has to travel from a raw-material to a finished product.
- Discipline Clerk : This boss looks after the discipline and absenteeism problems in the organisation.
- Instruction Card Clerk : The boss gives instructions about how to do a particular work.
(b) At the Doing Level :-
At the doing level there were also four supervisors. They are :-
- Gang Boss : He is responsible for setting up the machines and tools and for direct supervision of workers.
- Speed Boss : He is responsible for maintaining a proper speed of work.
- Repair Boss : He is responsible for the repairs and maintenance of machines.
- Inspector Boss : He is responsible for maintaining the quality of production.
Merits of Functional Organisation Structure
Facilitates specialization:
Functional Organisation structure facilitates division of work and specialization. Each boss has specialized knowledge of his functional area. He is in a better position to guide and help the workers.
Benefits of large-scale operations:
Functional Organisation offers the benefit of economy of large-scale operation. In this Organisation, one administrative unit manufactures all products. The available machinery, equipment and facilities are used fully for large-scale production.
Facilitates effective coordination:
Functional Organisation facilitates effective coordination within the function. This is possible as one boss is in-charge of a particular function and he looks after all activities, which come within that function.
Operational flexibility:
Functional Organisation possesses operational flexibility. Necessary changes can be introduced easily to suit the needs of the situation without any adverse effect on the efficiency.
Ensures effective supervision:
Functional Organisation facilitates effective supervision by the functional heads and foremen. Due to specialization, they concentrate on the specific functional area and keep effective supervision on their subordinates.
Merits of Functional Organisation Structure
Absence of unity of command:
Unity of command is absent in the functional Organisation as each worker gets orders and instructions from several bosses.
Fixing responsibility is difficult:
In functional Organisation, responsibility is difficult to fix on a specific person. This is because the responsibility itself is divided among many.
Unsuitable to non-manufacturing activities:
Functional Organisation can be introduced in the case of manufacturing activities. However, its application to non-manufacturing activities such as marketing, etc. has not been successful.
Costly:
Functional Organisation is costly, as more specialists are required to be appointed.
Creates confusion among workers:
Functional Organisation is based on specialization as function is taken as a base for dividing the work. The authority is overlapping the responsibility is divided. This confuses workers.
Conflicts among foremen, delays in decision-making and limited discipline within the departments are some more demerits of functional Organisation.
Line and Staff Organisation Structure
In the line and staff Organisation, line executives and staff (specialists) are combined together. The line executives are 'doers' whereas staff refers to experts and act as 'thinkers'.
The following chart shows line and staff Organisation structure:
The line executives are concerned with the execution of plans and Policies. They do their best to achieve the organizational objectives. The staff concentrates their attention on research and planning activities. They are experts and conduct advisory functions.
Staff specialists are regarded as 'thinkers" while execution function is given to line executives who are "doers". The staff is supportive to line. The staff specialists offer guidance and cooperation to line executives for achieving organizational objectives.
According to Louis Allen, "Line refers to those positions and elements of the Organisation, which have the responsibility and authority and are accountable for accomplishment of primary objectives. Staff elements are those which have responsibility and authority for providing advice and service to the line in attainment of objectives".
Characteristics of Line and Staff Organisation
Planning and execution:
There are two aspects of administration in this Organisation, viz., planning and execution.
Combining line and staff:
Planning function is entrusted to staff specialists who are 'thinkers' while execution function is given to line executives who are 'doers'. The staff is supportive to line.
Role of authority:
The line managers have authority to take decisions as they are concerned with actual production. The staff officers lack such authority.
Guidance from staff:
The staff provides guidance and advice to line executives when asked for. Moreover, line executives may or may not act as per the guidance offered.