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CHAPTER-07

ORGANIZATION

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Introduction

• Organization is a mechanism or structure which helps the activities to be performed effectively. The Organization is established for the purpose of achieving the business objectives. Wherever may be the business objectives, there is a need of an organization.

• The word ‘organization’ is derived the word ‘organism’ which means an organized body with connected interdependent parts sharing common life.

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TRANSLATIONHe who does not make people anxious and does not himself become anxious easily either; and he who is eithout joy, anger, fear or anxiety,:is my loved one.

INTERPRETATIONA good manager myst be calm and level-headed in all the situations. He should not be easily irritated or frustrated; not should he irritate or frustrate others.

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Meaning

• Organization can be compared to a human body. The human body consists of hands, feet, eyes, ears, nose, fingers, mouth, etc. These parts are performing their work independently and at the same time, one part cannot be a substitute to another. The same principles can be identified in the organization also.

• Each department performs its work independently

and be a substitute to another.

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Definition

• Organization is a harmonious adjustment of specialized parts for the accomplishment of some common purpose.

• “Organization is that process of 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 effectively together in accomplishing objectives.”

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Functions of organization

• Determination of activities• Grouping of activities • Allotment of duties to specified persons • Delegation of authority• Defining relationship • Co-ordination of various activities

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Principles of organization

• Principles of definition • Principle of objective• Principle of specialization or division of work • Principle of coordination • Principle of efficiency • Principle of efficiency• Principle of uniformity • Principle of correspondence • Principle of unity of command• Principle of balance

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Principles of organization

• Principle for responsibility• Principle of explanation• Principle of authority• Principle of leadership facilitation• Principle of equilibrium balance• Principle of continuity• Principle of span of control• Principle of exception

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Principles of organization

• Principle of flexibility • Principle of principle • Principle of simplicity and homogeneity • Principle of unity of direction• Principle of joint decision

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Nature or Characteristics of Organization

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Division of labour

Authority responsibility

structure

Communication

ORGANIZATION

Coordination

Objectives

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Importance of Organization or Advantages of Organization

• Facilitate administration• Increases the efficiency of management• Facilitates growth and diversification

Ensures optimum utilization of material resources and human efforts

• Adoption of new technology

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Importance of Organization orAdvantages of Organization

• Places proportionate importance to the various activities of the enterprise

• Encourage creativity and initiative• Facilitate coordination• Facilitate training and development of managerial

personnel• Prevents the growth of secret, influence and

corruption

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Classification of organization

A. Formal

B. Informal

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Formal organization

• The formal organization represents the classification of activities within the enterprise. Indicates who reports to whom and explains the vertical journal of communication which connects the chief executive to the ordinary and workers.

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Characteristics of formal organization

• Properly planned, based on delegated authority, deliberately impersonal, responsibility and accountability at all levels of organization should be clearly defined.

• Organizational charts are usually drawn.• Unity of command is normally maintained.• It provides of division of labour.

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Advantages of formal organization

• The definite boundaries of each worker is clearly fixed. It automatically reduces conflict among the worked.

• Overlapping of responsibility is easily avoided.• Buck passing is very difficult.• A Sense of security arises for from classification of the

task. • There is no chance for favoritism in evaluation and

placement of the employee. • It makes the organization less dependent on the task.

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Arguments against formal organization

• In certain cases, the formal organization may reduce the spirit initiative.

• Authority is for the sake of convenience of the employee without considering the need for using the authority.

• It does not consider the sentiments and values of the employees in the social organization.

• The formal organization may reduce the speed of informal communication.

• It creates the problems of coordination. We Learn – A Continuous Learning Forum

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Informal organization

• Informal organization is an organizational structure which establishes the relationship on the basis of the likes and dislikes of officers without considering the rules, regulations and procedures. The informal organization relationship exists under the formal organization the informal organization relationship or informal relation give a greeter job satisfaction and result in maximum production.

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Characteristics of informal organization • Informal organization arises without any

external cause. i.e. Voluntarily. • it is social structure formed to meet personal

needs. • Informal organization has in the organization

chart. • It acts as an agency of social control.

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Characteristics of informal organization

• Informal organization can be found all levels of organization within the managerial hierarchy.

• Informal organization develops from habits, conduct, customs and behavior of social groups

• There is no structure and definiteness to the informal organization

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Advantages of informal organization

• It fills the gaps and deficiency if the formal organization.

• Informal organization gives satisfaction to the workers and maintains the stability of the work.

• It is useful channel of communication.• The presence of informal organization

encourages the executives to plan the work correctly and act accordingly

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Disadvantages of informal organization

• It has the nature upsetting the morality of the workers.

• It acts according to mob psychology.• Informal organization indirectly reduces the

efforts of management to promote greater productivity.

• It spreads rumor among the workers regarding the functioning of the organization unnecessarily.

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Difference between formal and informal organization

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Sr. Formal Organization Informal Organization

1 It arises due to delegation of authority

It arises due to social interaction of people

2 It gives importance to terms of authority and functions

It gives importance to people and their relationship

3 The formal authority is attached to a position.

No such authority is attached to a person.

4 It is created deliberately It is spontaneous and natural

5 Rules, duties and responsibilities of workers are given in writing

No such rules and duties followed in informal organization.

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Difference between formal and informal organization

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Sr. Formal Organization Informal Organization6 Formal organization comes from

outsiders who are giving in writing.Informal organization comes from those persons who are objects of its control.

7 Formal authority flows from upwards to downwards

Informal authority flows upwards to downwards or horizontally.

8 Formal organization may grow to maximum size

Informal organization tends to remain smaller.

9 It is created for technological purposes

It arises from man’s quest for social satisfaction

10 Formal organization is permanent and stable

There is no such permanent nature and stability.

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Theories of organization

1. Classical theory 2. Neo-classical theory 3. Modern theory 4. Motivation theory5. Decision theory

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Classical theory

• Division of labour:

• Scalar of functional processes:

• Structure;

• Span of control

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Characteristics of classical theory

• It is based on division of labour, objectives and tasks of organization, Co-ordination of efforts.

• It is concerned with formal organization. • it believes in human behavior of the

employees. • It fixes a responsibility and accountability for

work completion.

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Criticism of classical theory

• This theory is based on authoritarian approach.

• It does not give two easy communications.• It ignores the influences factures on individual

behavior. • The generalizations of the classical theories

have not been tested by strict scientific methods.

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Neo-classical theory

Contributions of neo-classical theory• Person should be the basis of an organization • Organization should be viewed as a total unity. • Individual goals and organization goals should be

integrated. • Communication should be moved from to top and

from top to bottom. • Members usually belong to formal and informal

groups and interact with others within each group or sub-group.

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• Motivation theory: It is concerned with the study motivation of employees.

• Decision theory: Decision theory is on the bases that at all the levels the decisions are taken.

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