WEEK 4 - ORGANISATION

The word ‘Organisation’ has come from the word ‘organism’ which means a structure
of interrelated and interdependent parts. The parts or components of organization
consist of men, machines, materials, methods, money, functions authority, and
responsibility. The task of organization is to unite or integrate these components
effectively for the purpose of attaining the common goal.

Definition

According to Sheldon, "Organisation is the process of so combining the work which

individuals or groups have to perform with facilities necessary for its execution, that the
duties so performed provide the best channels for efficient, systematic, positive and co-
ordinated application of available effort."
In the words of Chester I Bernard, "Organisation is a system of co-operative activities
of two or more persons."
Mc Ferland has defined organisation as, "an identifiable group of people contributing
their efforts towards the attainment of goals".

Characteristics of Organisation

The important elements of an organization are given below

1. Common Purpose
2. Division of Labour
3. Authority Structure
4. People
5. Commnication
6. Coordination
7. Environment
8. Rules and Regulations

1. Common Purpose: Every organization exists to accomplish some common goals. The
structure must reflect these objectives as enterprise activities are derived from them .It is
bound by common purpose.
2. Division of Labour: The total work of an organization is divided into functions and sub
functions. This is necessary to avoid the waste of time, energy and sources which arise when
people have to constantly change from one work to another. It provides benefits of
specialization.
3. Authority Structure: There is an arrangement of positions into a graded series. The authority
of every position is defined. It is subordinate to the position above it and superior to the one
below it. This chain of superior-subordinate relationships is known as chain of command.
4. People: An organization is basically a group of persons. Therefore activity groupings
and authority provisions must take into account the limitations and customs of people.
People constitute the dynamic human element of an organization.
5. Communication: Every organization has its own channels of communication. Such
channels are necessary for mutual understanding and co-operation among the
members of an organization.
6. Coordination: There is a mechanism for coordinating different activities and parts of
an organization so that it functions as an integrated whole. Cooperative effort is a
basic feature of organization.
7. Environment: An organization functions in an environment comprising economic,
social, political and legal factors. Therefore the structure must be designed to work
efficiently in changing environment. It cannot be static or mechanistic.
8. Rules and Regulations: Every organization has some rules and regulations for
orderly functioning of people. These rules and regulations may be in writing or implied
from customary behaviour.

Principles of Organisation
Organisation is the establishment of relationship among various persons and positions in the
organization. It also involves the assignment of responsibility and delegation of requisite
authority for carrying out the assigned task efficiently and systematically.
On the basis of past experiences certain principles have been derived for a sound
business organization. Taylor, Fayol, and Urwick have spelt out various principles on
the basis of their experiences in the business. Some of those principles are discussed
as follows:

1. Principle of Objective. The enterprise should set up certain aims for the
achievement of which various departments should work. A common goal so
devised for the business as a whole and the organization is set up to achieve that
goal. In the absence of a common aim, various departments will set up their own
goals and there is a possibility of conflicting objectives for different departments.
So there must be an objective for the organisation.
2. Principle of Specialisation. The organisation should be set up in such a way that
every individual should be assigned a duty according to his skill and
qualification. The person should continue the same work so that he specialises in
his work. This helps in increasing production in the concern.
3. Principles of Co-ordination. The co-ordination of different activities is an
important principle of the organisation. There should be some agency to co-
ordinate the activities of various departments. In the absence of co-ordination
there is a possibility of setting up different goals by different departments. The
ultimate aim of the concern can be achieved only if proper co-ordination is done
for different activities.

4. Principle of Authority and Responsibility. The authority flows downward in

the line. Every individual is given authority to get the work done. Though
authority can be delegated but responsibility lies with the man who has been
given the work. If a superior delegates his authority to his subordinate, the
superior is not absolved of his responsibility, though the subordinate becomes
liable to his superior. The responsibility cannot be delegated under any
circumstances.
5. Principle of Definition. The scope of authority and responsibility should be
clearly defined. Every person should know his work with definiteness. If the
duties are not clearly assigned, then it will not be possible to fix responsibility
also. Everybody's responsibility will become nobody's responsibility. The
relationship between different departments should also be clearly defined to
make the work efficient and smooth.
6. Span of Control. Span of control means how many subordinates can be
supervised by a supervisor. The number of subordinates should be such that the
supervisor should be able to control thier work effectively. Moreover, the work
to be supervised should be of the same nature. If the span of control is
disproportionate, it is bound to affect the efficiency of the workers because of
slow communication with the supervisors.
7. Principle of Balance. The principle means that assignment of work-should be
such that every person should be given only that much work which he can
perform well. If some person is over worked and the other is under-worked, then
the work will suffer in both the situations. The work should be divided in such a
way that everybody should be able to give his maximum.
8. Principle of Continuity. The organisation should be amendable according to the
changing situations. Everyday there are changes in methods of production and
marketing systems. The organisation should be dynamic and not static. There
should always be a possibility of making necessary adjustments.
9. Principle of Uniformity. The organisation should provide for the distribution of
work in such a manner that the uniformity is maintained. Each officer should be
incharge of his respective area so as to avoid dual subordination and conflicts.
10. Principle of Unity of Command. There should be a unity of command in the
organization. A person should be answerable to one boss only. If a person is
under the control of more than one person then there is a like hood of confusion
and conflict. He gets contradictory orders from different superiors. This principle
creates a sense of responsibility to one person. The command should be from top
to bottom for making the organization sound and clear. It also leads to consistency
in directing, co-coordinating and controlling.
11. Principle of Exception. This principle states that top management should
interfere- only then something goes wrong. If the things are done as per plans
then there is no need for the interference of top management. The management
should leave routine things to be supervised by lower cadres. It is only the
exceptional situations when attention of top management is drawn. This principle
relieves top management of many botherations and routine things. Principle of
exception allows top management to concentrate on planning and policy
formulation. Important time of management is not wasted on avoidable
supervision.
12. Principle of Simplicity. The organisational structure should be simple so that it
is easily understood by each and every person. The authority, responsibility and
position of every person should be made clear so that there is no confusion about
these things. A complex organisational structure will create doubts and conflicts
among persons. There may also be over-lapping and duplication of efforts which
may otherwise be avoided. It helps in smooth running of the organisation.
13. Principle of Efficiency. The organisation should be able to achieve enterprise
objectives at a minimum cost. The standards of costs and revenue are pre-
determined and performance should be according to these goals. The
organisation should also enable the attainment of job satisfaction to various
employees.
14. Scalar Principle. This principle refers to the vertical placement of supervisors
starting from top and going to the lower level. The scalar chain is a pre-requisite
for effective and efficient organisation
Types of Organisation
Of the various types of organisation, the following ones are very popular:
(i) Line Organisation,
(ii) Line and Staff Organisation,
(iii) Functional Organisation,
(iv) Committee Organisation,
(v) Project Organisation and
(vi) Matrix Organisation.

Line Organisation,

The line organisation, also known as the 'Military Organisation', is the oldest form of
organisation. In such an organisation, the superior at the top makes decisions and
communicates his decisions and assigns certain work to his immediate subordinate.
The subordinate, in turn, makes certain decisions, within the scope of his authority,
and assigns certain work to his own subordinate and so on.

Merits of Line Organisation

The following are the merits of line organisation:
1. It is very simple to establish line organisation.
2. There are no complicated relationships in such an organisation. It can easily be
understood by anyone.
3. Line organisation clearly defines the authority and responsibility of each individual.
Every person knows clearly whom he should report to and who should report to
him.
4. In such an organisation, there is unity of command, i.e., subordinate gets orders
from one superior only.
5. Prompt decisions can be taken, as there is unity of command and control.
6. It is economical, It does not employ assistants (called 'staff specialists' to support the
line managers).
7. It provides scope for better supervision. This ensures greater discipline,
Demerits of Line Organisation.

The demerits of line organisation are as follows:

1. It lacks specialisation. The line manager is responsible for both planning and
execution of the work assigned to him. In a typical line organisation, the production
manager, for example, is responsible not only for attaining the production targets but
also for quality control, plant maintenance and so on.
2 The line managers are also overburdened with lot of work. The marketing
manager, for example, has to not only monitor sales, but also assess the
performance of the salesmen, take care of advertisement and sales promotion,
supervise packing and so on. As he has to perform so many activities, he may
become physically as well as mentally tired. This may also affect his efficiency.
3. Inline organization, there is always downward communication. The subordinates
are made to carry out the orders of the superiors. As a result, the subordinates may
 lose initiative.
4. The line managers enjoy monopoly in the matter of decision-making. It, thus, gives
scope for decisions that are detrimental to the interests of the subordinates.

Line and Staff Organisation

In this kind of an organization, staff experts, who are specialists in specific areas, assist
the line personnel. These experts do not have the powers to command any subordinate
other than those who are under their direct control. They can only advise the line
personnel on certain matters. They also do not have the authority to take decisions on
vital issues. It is for the line manager to decide whether to accept the suggestions of
the staff specialists or not the staff experts provide relief to the line personnel when the
latter are over burdened with work.
The following diagram explains the concept of line and staff organization:

Merits of Line and Staff Organisation

The following are the merits of line and staff organisation:
1. The staff experts provide support to the line personnel. This enables the line
executives to perform their duties much more efficiently.
2. The line executives also get relief from work burden. The staff experts perform
certain activities which, in their absence, would be performed
3. only by the line executives. For example, in the absence of the purchase manager
and the quality-control manager, the tasks of buying raw materials and quality
control would only fall on the production manager.
4. The suggestions, given by the staff experts, enable the line executives to take
better decisions.
5. The sharing of work by the staff experts also helps to avoid delay in performing
the entire work.
6. As every executive performs only a specific task, he is able to do it with full
concentration. He is also able to work to his fullest capacity. This results in overall
efficiency.

Demerits of Line and Staff Organisation:

The demerits of line and staff organisation are as follows:
Conflicts often arise between the line and staff executives.
 The staff experts do not have the authority to make decisions. They can only
advise. Such a position without authority makes them ineffective.
 It is difficult to explain in precise terms the pattern of authority relationships
between the line and staff executives. This results in confusion.
 The line and staff pattern of organisation would enhance the cost of operation.
 To conclude, it may be said that line and staff organisation, with all its limitations,
is suitable for a concern that is expanding.
 Functional Organisation

Such a pattern of organisation is suitable for large-scale establishments. In a

functional organisation, there will be separate departments to look after different lines
of activities.

Advantages of Functional Organisation

The advantages of functional organisation are as follows:
1. It promotes specialisation. Each department specialises in a particular line of work.
2. Each functional head looks after only a specific activity. Thus, there is no over
burdening of key executives.
3. Better control can be exercised over the various activities of the concern in view of
the presence of so many key executives.
4. There will be maximum efficiency as each individual concentrates on a particular
task.
5. Specialisation and'standardisation will result in mass production.
Functional organisation, however, suffers from the following drawbacks:

Drawbacks of Functional Organisation

1. Functional organisation is unwieldy in view of the presence of a number of
departments and divisions.
2. It is always difficult to secure proper co-ordination among the different
departments and individuals.
3. Any major decision requires the participation of different functional heads. This may
lead to delay in arriving at a decision.
4. Functional organisation is also expensive to adopt. The creation of a number of
departments and divisions and also the employment of many executives and
subordinate staff will involve heavy expenditure.
Committee Organisation

A committee is a group of persons entrusted with certain tasks. The committee members
are expected to discuss the problem under consideration in detail and come out with a
solution. A number of committees may be created in a concern depending upon the
requirement. The committee may meet at regular intervals and discuss the progress of
work at the various levels.

Types of Committees
1. Standing or Permanent Committee,
2. Temporary or Ad hoc Committee,
3. Executive Committee,
4. Advisory Committee,
5. Formal Committee, and
6. Informal Committee.
Standing or Permanent Committee
Such a committee is never dissolved. Although there may be changes in membership,
the committee remains always. The Board of Directors of a company is an example.
Temporary or Ad hoc Committee
A temporary committee is one that is created for a specific purpose. As soon as the
purpose has been accomplished, the committee stands dissolved. For example, if wage
revision is due for the workers, the management may constitute a committee to study the
various aspects of wage revision and make a report to it. As soon the committee
submits its report, it will stand dissolved.
An executive committee is one that has powers to make important decisions for the
enterprise. The Board of Directors of a company has such decisive powers.
Advisory Committee.
An advisory committee can only make suggestions. It does not have the
powers to make decisions.
Formal Committee
A formal committee is one that is constituted as per the rules and policies of the
organisation. It has hierarchy. It functions according to the lines of authority. Informal
Committee
An informal committee is one that is not constituted as per the rules and policies of the
organisation. Such a committee is the outcome of informal meetings of the workers to
discuss their work-related problems.

Committees - Advantages
The following are the advantages of a committee:
1. A committee provides scope for group judgement. Every member of the committee
can express his/her views whenever a problem is discussed. The decision that is
finally taken will certainly reflect the views and suggestions of all the members.
Such an advantage is not available in an individual decision-making situation.
2. The committee also secures proper co-ordination among the individuals
and departments. When the members of a committee meet and discuss a common
problem, each member puts forth his views that are heard by others. It is, therefore,
possible for an individual to understand the problem of another.
3. The committee members feel motivated when they participate in the discussions.
As a result, they implement the decision with the same level of enthusiasm with
which they made it.
4. By accommodating diverse interest groups, the committee functions as a democratic
organisation. For example, a committee constituted in a business establishment may
have representatives of both the management and the workers.
5. Problems that cannot be solved by an individual will have to be referred to a
committee. As the committee has intellectuals drawn from different spheres, it will
be able to find a solution easily.
6. The committee is also used as a tool to postpone decisions on certain sensitive
issues.
Drawbacks of a Committee
The drawbacks of a committee are as follows:
1. Constituting a committee is an expensive affair. The committee members may
have to be paid remuneration for their work. They have to be paid dearness
allowance and travelling allowance each time a meeting is organised.
2. The committee members take more time on discussions and deliberations and as a
 result the decision gets delayed. The delay, in many cases, may defeat the very
purpose for which the committee has been constituted.
3. To reach a consensus among the members is often a difficult task. With a view to
satisfying every member, a compromise decision may be made, sometimes, at
the last minute.
4. There may also be a tendency on the part of some influential members in the
committee to thrust their views on others.
5. There is no fixed responsibility on any member of the committee for the outcome
of its decision. It the decision turns out to be a failure, no individual will come
forward to take the blame.
6. The committee may often be constituted without the intention to provide any kind
of a relief to the aggrieved persons.

Project Organisation
The concept of project organisation became popular particularly after World War II. It
may be successfully adopted if it is necessary to manage a small number of large projects.
Each project team has specialists in different fields. The project manager would co-
ordinate the activities of the team members.

Evaluation - Merits of Project Organisation

The merits of project organisation are given below:
1. It can be designed to suit individual projects.
2. It makes use of specialised knowledge and skill wherever required.
3. It fixes responsibility on individuals on the work done by them.

Demerits of Project Organisation

The Demerits of project organisation are as follows:
1. The project manager may have a tough time dealing with specialists from different
fields.
2. Evaluation of performance of the various specialists also poses problems for the
project manager as he may not be well versed in engineering, R&D, accounts
and so on.
3. Decision-making is also difficult for the project manager who may be
pressurised by the specialists.
4. The time within which the project has to be completed will put pressure on every
individual.

Matrix Organisation

Matrix organisation is considered suitable where a large number of small projects will
have to be managed. A matrix organisation is also known as a 'multiple command
system' as it has two chains of command i.e., the flow of authority is both vertical (Line
Authority) as well as horizontal (Project Authority). Separate departments are established
for each specified task. But these departments have to share the resources with the rest
of the organisation and cannot claim any exclusive right.
 Advantages of Matrix Organisation
The advantages of matrix organisation may be stated as follows:
1. It offers the benefits of both functional organisation as well as technical specialisation.
2. It can be adapted to suit individual projects.
3. It offers greater motivation for the personnel engaged in the project and they show keen
interest in its successful completion.
4. It also promotes communication between the various personnel associated with a project.

Drawbacks of Matrix Organisation

The drawbacks of matrix organisation are as follows:
1. It goes against the principle of unity of command as each individual gets orders from both
the functional and the project managers.
2. Dual command may result in confusion.
3. Quick decisions may not be possible in such a pattern of organisation in view of the
complex relationship that exists.
4. It also gives scope for conflicts among the personnel and as a result, the execution of the
project may get delayed.

Features of Good Organisation Structure

A good organisation structure should meet various needs and requirements of the
enterprise. The following are the features of a good organisation structure :
1.Clear line of authority. There should be a clear line of authority from top to the
bottom. The delegation of authority should be step by step and according to the nature
of work assigned. Every body in the organisation should be clear about his work and
the authority delegated to him. In the absence of this clarity there will be confusion,
friction, and conflict.
2. Adequate delegation of authority. Delegation of authority must be commensurate
with the responsibility assigned. If the authority is not sufficient for getting the
assigned task then the work will not be completed. Sometimes managers assign work
to subordinates without giving them proper authority; it shows lack of decision-
making on their part. An inadequate authority will create problems for the
subordinates because they may not be able to accomplish the task.
3. Less managerial levels. As far as possible minimum levels of management may be
created. More the number of these levels, more the delays in communication. It will
take more time to convey the decisions from the top to the bottom. Similarly,
information from lower levels will take much time in reaching at the top. The number
of managerial levels depends upon the nature and scale of operations. No specific
number of levels may be specified for each and every concern but efforts should be
made to keep them at the minimum.
4. Span of control. Span of control refers to the number of people a manager can
directly supervise. A person should supervise only that number of subordinates to
whom he can directly keep under contact. The number of people to be supervised may
not be universally fixed because it will be influenced by the nature of work. Efforts
should be made to keep a well managed group under a supervisor otherwise there will
be inefficiency and low performance.
5. Simple and flexible. Organisational structure should be very simple. There should
 not be unnecessary levels of management. A good structure should avoid ambiguity
and confusion. The system should also be flexible to adjust according to the changing
needs. There may be an expansion or diversification which required reclassification
of duties and responsibilities. The organisation structure should be able to incorporate
new changes without altering the basic elements.

Distinction between Formal and Informal Organisation

Formal Informal Organisations

1. It is Organisations
consciously and 1. It arises spontaneously.
deliberately
created.
2. Authority and 2. It is only personal factors such
responsibility are
vital for its functioning. as
friendship, affinity, trust
and confidence that are
3. Rules and procedures are 3. Personal
important.relationship
important. between individuals is
4. It can be shown on the 4. It cannot
more be shown.
important.
organisation chart.
5. Authority flows 5. There is no flow of authority
downwards and
responsibility flows and responsibility.
6. It
upwards.
is deliberately created 6. It is created to fulfil the social
attain
only tothe enterprise needs of an individual.
objectives. However, it may also
contribute to the
7. Designations and official enterprise goal.
7. Designations and official
positions
are very important. positions
are unimportant.
8 It is permanent and stable. 8. It is unstable.
.