‘Any thing that is organized’ is organization.

Organization is the back-bone of

management. Without efficient organization, no management can perform
its functions smoothly .Elements of organization are:
ii. Organization is a group activity.
iii. Organization consists of assigning duties, granting of authority, fixing
responsibility and co-coordinating activities .
iv. Organization is the means to achieve the objectives of the enterprise.
The term organization is used in management in two different ways:
• As a structure , and
• As a process.
ORGANIZATION AS A STRUCTURE
According to this view organization as structure means coordinated
relationship. As a structure, organization is the network of horizontal and
vertical relationships among the members of a group designed to
accomplish some common objectives
 Organization as structure means the classified relationship between
formal positions and jobs. It is static, because it establishes
relationship between various positions in the enterprise instead of
maintaining cordial relationship between persons occupying
position.
As a systematic combination of people, functions and facilities,
organization structure provides the mechanism within which people
work together for accomplishment of desired objectives.
The formal structure of an organization is two-dimensional –horizontal and vertical.
The horizontal dimension depicts differentiation of jobs into departments or divisions.
The vertical dimension reflects the hierarchy of authority relationships with a number of
levels from top to bottom. It is a structure of duties and responsibilities which are
necessary for the achievement of objectives.
An organization structure should be designed to clarify who is to do what tasks and who
is responsible for what results, to remove obstacles to performance caused by confusion
and uncertainty of assignment, and to furnish decision making and communications
networks reflecting and supporting enterprise objectives.
Thus, according to James D. Mooney, organization is the form of every human
association for the attainment of a common purpose. Therefore organization structure is
the skeleton framework of business.
 Organization Process As a basic function of management ,organizing is
the continuous and dynamic process of creating harmonious authority-
responsibility relationships between specialized units .
Thus organizing is the process of defining and grouping the activities of
the enterprise and establishing the authority relationships among them.
In performing the organizing function ,the manager defines,
departmentalizes and assigns activities so that they can be most
effectively executed.
Organization as process consists of the following five functions:
ii. Dividing functions into manageable units i.e. departments, sections and jobs.
iii. Grouping of identical functions / activities.
iv. Assigning duties to the right persons.
v. Granting appropriate authority to the employees and also fixing their
responsibilities.
vi. Defining the mutual relationship between employees.
According to Koontz and O’Donnell, organizing involves “the establishment of an
intentional structure of roles by identifying and listing the activity required to the
purpose of an enterprise , the grouping of these activities , the assignment of such
groups of activities to a manager , the delegating of authority to carry them out, and
provision for coordination of authority relationship horizontally and vertically in the
organization structure.”
“Organization is any form of human association for the attainment of a
common purpose.” Mooney and
Railey
‘Organization is a system of cooperative activities of two or more persons.”
Chester Barnard
“Organization is the grouping of activities necessary to attain enterprise
objectives and the assignment of each grouping to a manager with authority
necessary to supervise it.” Koontz
and O’Donnell
“Organization is the arranging or combining of resources to achieve an
economic betterment with the resources available to achieve the maximum
result , or profit with the best least possible expenditure of resources.”
F.J. Wright
Organization thus is an arrangement for internal administration of the
enterprise. Organizing is the process of determining the total activities to
achieve a given objectives.
 Different authors look at the word ‘Organization’ from their own
angle. One thing which is common in all the view points is that
organization is the establishment of authority relationship among
persons so that it helps in the achievement of organizational
objectives. The main characteristics of organization are as follows:

i. Organization leads to Division of Work.

ii. Organization brings Co-ordination.
iii. Organization provides Common Objectives.
iv. Organization facilitates Co-operative Relationship.
v. Organization leads to well-defined Authority Responsibility relationship.
vi. Resources
vii. Environment
viii. Rules and regulations.
Organization structure is not static frame. It undergoes change with changes in the
external environment and internal conditions. While framing the structure the
factors like goals, strategy, size ,people, technology and environment should be
considered.
 Organization is the foundation upon which the whole structure of
management is built. It is a backbone of sound management. A sound
organization structure contributes to the success of the enterprise in
the following ways:

1) Facilitates Administration
2) Facilitates growth and diversification.
3) Permits optimum use of technological improvements.
4) Encourages use of human beings.
5) Stimulates creativity.
6) Encourages good human relations.
7) Ensures continuity of enterprise.
8) Fosters coordination
 Organization Process have got these
steps:
• Identifying the work – The first step is to identify and detail all the work that
must be done to achieve the organizational objectives. Each organization will
achieve its objectives in a different way. Therefore, it must identify the tasks
which must be performed for the purpose.
• Division of Work –The need of setting up an organization will arise because
the tasks to be accomplished by it cannot be performed by a single individual.
The total workload of the organization is divided into various functions, sub-
functions and further sub functions such that these may be logically and
comfortably performed by one person or group of persons.
• Grouping of Similar Activities – The next step is to group the similar
activities and then place each group of them under the charge of specialist
individual or a department.
• Assignment of Duties –After grouping various activities into manageable
units, suitable persons are selected to be assigned each group of activities.
The assignment of duties should be appropriate, taking into consideration
qualifications and experience, and also the physical capacity of the individual
or group.
 • Delegation of Adequate Authority-Assignment of a group
of activities to an individual is followed by delegation of
appropriate authority to him to discharge his duties.

• Defining relationships between Senior and Subordinate- Where two or more

persons work together for a common goal , it becomes necessary to define the
relationship between them in clear terms. Each person should know who is his
superior , from whom he has to take orders and to whom he will have to report.
Similarly , each superior should know what authority he has over his subordinates.
• To bring Co-ordination among departments and Factors of Production-
Individuals and groups within an organization carry out their specialized functions.
Sometimes, this may result in conflict between them, which may adversely affect the
achievement of organizational goals.
• Providing proper physical facilities- It is another one of the most important duty of
the organization to provide a required and best physical infrastructure like proper
machine proper material best quality of methods and good plant layout and plant
design.
 Identification Grouping of
Division Assignment
Of activities Similar
Of work Of duties
&jobs activities

Feedback

Providing
To bring Delegation
proper Defining
Coordination Of
Physical relationships
&cooperation Authority
facilities
 The basic principles of organization are as
follows;
• Unity of Objectives- An organization structure is sound when it facilitates
the accomplishment of objectives. Therefore, the organization as a whole
and every part of it must be geared to the basic objectives of the enterprise.
• Principle of Specialization: The organization structure should be
formulated in such a way that the activities of the enterprise are divided
according to the different functions and the same are assigned to persons
according to their specialization.
• Principle of span of control: The span of control should be minimum
because there is a limit to the number of person that can be effectively
supervised by one boss.
• Principle of exception: Only exceptionally complex matter should be
referred to the executives for their decision and matters of routine nature
should be decided by the subordinates themselves.
• The Scalar Principle: For making management effective, there should be a
clear line of authority from top to bottom of the organization. Every
subordinate should know who his superior is and who his subordinates are.
 • The Principle of authority: Authority that is given to the
manager enables him to accomplish the objectives of the
enterprise. Hence, the authority of each manager should be
clearly defined and also it should be equal to the responsibility
entrusted to him.

• Principle of Unity of command: each subordinate should have only

one superior and dual subordination should be avoided. Dual
subordination may result indiscipline in subordinates, undermining of
authority, disorder, delay and confusion.
• Principle of delegation: The organization structure should provide for
the delegation of authority at every level. The authority delegated should
be equal to responsibility so as to enable the concerned person to
accomplish the task assigned to him by his superior.
• Principle of Responsibility: The superior should not be allowed to
avoid responsibility by delegating authority to his subordinates. It means
that superior should be held responsible for the acts of his subordinates
to whom he has delegated authority.
• Principle of Flexibility: The organization structure should be such
which should be adaptable to the changing circumstances.
 • Principle of Simplicity: The organization structure should
be simple with a minimum number of levels. If the
organization structure has a large number of levels, the
problem of effective co-ordination and communication
may arise.
• Principle of continuity: The organization structure should be
serviceable for a long time. This is possible if it is dynamic and
capable of adapting itself to the needs of changing circumstances.
• Principle of unity of direction: It means for a group of activities
having the same objective, there should be one plan and one
objective.
• Principle of efficiency: The structure that is formulated should
enable the business concern to function efficiently and achieve its
objectives with minimum cost and effort.
Thus, we find that to develop a sound and efficient
organization structure, certain principles are necessary . Every
manager should have a knowledge of these principles and apply
them efficiently.
One of the important components of the organization process is the creation of
an appropriate organization structure. The organization structure represents
the hierarchical arrangement of various positions in the enterprise. It helps in
allocating authority and responsibility formally. But there is no best structure
of the organizational relationship which may be suitable , for enterprise has
to evolve its own organization structure based on the nature of the activities
and business competence of personnel and the philosophy of the
management. There are five types of the organization:
b) Line Organization
c) Line & Staff Organization
d) Functional Organization
e) Project or Matrix Organization
f) Committee Organization
 Acc. to McFarland, “ Line structure consists of the direct vertical
relationship which connect the positions and tasks of each level
with those above and below it.”
The concept of the Line organization holds that in any organization derived from a scalar
process ,there must be a single head who commands it.
Following is the chart showing the line organization:
Board of Directors

Managing Director

Divisional Manager Divisional Manager

Eastern Western

Assistant Manager A Assistant Manager B Assistant Manager C Assistant Manager D

Foreman Foreman

Workers Workers
 From the above chart, the following special features of
the line organization come up:

a. There are many levels of management depending upon the scale

of business and decision –making ability of managers. Each
level of management has equal rights.
b. There is a vertical flow of authority and responsibility. The lower
positions derive authority from the higher positions.
c. There is the unity of command.
d. There is scalar chain in the line organization.
e. There is limit on subordinates under one manager. A manager
has control only over the subordinates of his department.
i. Simplicity
ii. Clear-cut division of authority and responsibility.
iii. Strong discipline
iv. Unified control
v. Prompt decisions
vi. Flexibility

i. Heavy burden of work

ii. Concentration of authority
iii. Lack of specialization
iv. Lack of communication
v. Scope for favoritism
 The line and staff organization refers to a pattern in which the staff
specialists advice the line managers to perform their duties. The
main function of the staff is to help the line executives in such
activities which require expert and specialist knowledge.

Following are the characteristics of the line and staff organization:

2. Managers are of two types-Line Managers and Staff managers.
3. The line managers perform the functions of decision-making,
issuing orders and controlling while the Staff managers perform
the functions of advising, assisting and providing expert and
specialized services.
4. There is a unity of command.
5. There is a scalar chain.
 Line Position Staff Position

Board of Directors

Managing Director

Personnel Financial
Manager Controller

Market
Sales Research
Industrial Production Manager Officer
Engineer Manager
Asst. Asst.
Production Production Sales Sales
Supervisor Supervisor Manager Manager
1. Specialization
2. Encouragement to research and development
programmes
3. Balanced decisions
4. Less burden on line managers

1. Confusion
2. Ineffectiveness of the staff
3. Conflict between the line and staff.