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When two or more persons come together to

achieve a common goal,they are said to be organised themselves and the arrangement is called Organisation According to one of the definition: Organization is that structure that assigns authority and responsibility amongst individuals working together for accomplishment of a common goal.


Objective-oriented activity Delegation of Authority and Responsibility Dependent on Planning Importance to Human Element Flexibility Group activity Supervision, Control and Co-ordination are its basis

Importance of Organisation:

Organisation establishes an interrelation between authority and responsibility. To clarify the importance of organisation a successful industrialist says, Take away our plants,take away our business , oh! Take away our wealth but permit us to retain our organisation. Within no time we shall be on our feet once again. Andrew

1. 2. 3. 4. 5. 6. 7. 8.

9. 10.

The success or failure of a business largely depends upon its formation of organisation There is no duplication of work and co-ordination is maintained because of organisation. Organisation establishes inter-relationship between functions and functions and also between functions and individuals. Maximum utilization of time and resources becomes possible due to organisation Employees become more responsible. Organisation makes control easy and effective. Discipline and morale of personnel increases. Division of labour and research are encouraged , and by adopting new technology administrative efficiency can be increased. Smooth administration is maintained due to clarity of authority and responsibility. Every activity gets equal justice.

Every business has to form an organisation for accomplishment of targeted objectives. With the existence of business, there is existence of organisation. Organisation should be flexible so as to adapt to the changing time and circumstances. Following are the stages for the formation of organisation:

1. 2. 3. 4. 5. 6. 7.

Clarification of Objectives. Listing of Functions. Departmentation. Departmental position and qualification. Delegation of Authority and Assignment of Responsibility. Establishment of Inter-relationship. Preparation of Organisational Chart.

1) 2) 3) 4) 5)

Line Organization Functional Organization Committee Organization Line and Staff Organization Matrix Organization

A type of organization where the authority and responsibility flow in a downward trend from top to bottom is called Line organization It is more known, old and simple type of organization. Every person is responsible to his immediate superior. This type of organization is used in military for years.

Firstly the entire business is divided into different departments. Each department gets the head of the department. The departmental head is given full authority and responsibility of his department. Departmental head has internal authority and are independent of one another. The other name for this type of organisation is departmental

Generally organization is divided into three departments namely Production, Sales and Administrative. Production manager ,sales officer, etc are appointed on the basis of important functions of departments. The one co-ordinating the functioning of departmental heads is the General Manager. Thus, in line organisation authority flow from top to bottom.

Board of directors General manager Production department Sales department Administrative department

Purchase officer

Production Sales officer officer

Publicity officer

Administrative officer

Accounts officer






Personnel officer



Line organisation has a simple structure

that can be understood by every common man . There is a clear division of authority and responsibility in such type of organisation. The departmental head possess full authority over his department which helps in maintaining internal control. Due to internal autonomy the head can take quick decisions.

Departmental head concentrates on

developing his personality as he himself has to extract work from persons of his dept. Flexibility can be brought as per the changes in time and circumstances. Unity of command is well maintained as everyone has to take orders from one individual only. The structure is less expensive and more economic.

Sometimes this type becomes autocratic . Lack of Specialization. Centralization of authority to one head. In this type of organisation it becomes

difficult to acquire the services of highly Qualified executives capable in every respect. As the department and officers are independent ,co-ordination is difficult. There is no flow of communication from bottom to top and therefore many problems are created.

A type of organisation that gives importance

to functions instead of departments is called Functional organisation . Different functions are given importance. Experts are included who have specialisation in their own fields. Different experts are assigned different tasks of work to bring effectiveness and increasing productivity.

Division of authority and responsibility is on

the basis of functions rather than on departments. Experts are appointed for every function. The experts are given responsibility not for a specific department but for the unit as a whole. Workers are responsible to different officers instead of one officer. There is a good co-ordination between the experts to achieve the organizational objectives.

Chief Executive

Planning division

Factory division

Information Discipline Accounts Counseling officer officer officer officer

Group officer

Speed Quality Maintenance officer control officer officer



1) Specialization is possible. 2) Decentralization of Authority. 3) Co-ordination is possible because all the 4) 5) 6) 7) 8)

experts are inter-dependent. Less burden of work. Benefit of expertise. Training. Flexibility. Easy Decision Making.

1) Complexity. 2) Lack of unity of Command 3) Lack of discipline 4) Lack of Responsibility. 5) Delay in Decision. 6) Expensive.

A committee is a group of people who have

been formally assigned some task or some problem for their decision and implementation. In modern business enterprise there is a widespread use of committee in all areas of mgmt. In short, committee is that type of organisation that takes decisions collectively for the business. This type is not only useful in business but also has been found to be more useful in

Top executive Committee

Production Committee

Sales Committee

Administrative Committee

Purchase Committee

Publicity Factory Committee Committee

Sales Committee Secretary Accountant







1) Better decision making. 2) Democratic. 3) Specialization. 4) Co-ordination. 5) Decentralization of Authority. 6) Reduced work burden. 7) Improvement in Relations. 8) Research is encouraged.

1) Secrets maintained. 2) Delay in decision making. 3) No individual responsible.

When it is responsibility of everybody, it is of nobody. 4) Autocracy. 5) Groupism or internal conflicts.

A form of organisation in which the authority

is assigned only for meeting the responsibility of some functions is known as formal organisation. It is an organisation to bridge the relationship for the accomplishment of specific objectives. E.g., Line, Functional, Line & Staff organisation,etc. The hierarchy of authority is clear and welldefined. The position of superior subordinate s is well defined.

It is a natural structure arising out of the social tendency of people to associate and interact. Such organisation emerges when a group of willing and concerned employees is formed on the basis of human relations. Its values , goals are mainly centered around group and individual satisfaction, relationship, and friendship. People with similar attitudes, interests and work related needs are attracted to one another. Informal organisation are largely accepted in modern times.




4) 5)

Mental stress of employees gets reduced. The authority of management is restrained because of employee groups. This type complements the accomplishments of objectives of formal organisation. It helps in communication. Social restrictions on employees are


to opposition by employees there is a possibility of resistance to changes by the mgmt. Indiscipline is likely to be encouraged. In place of correct information there is a risk of rumours being spread. There is also a risk of industrial peace being endangered due to negative leadership. There is possibility of obstacles being


is the oldest type of organisation? Formation of organisation is what type of process? Define: Formal Organisation. Give the other name of Line organisation. What is the basis of organisation? In which type there is a possibility of becoming autocratic? Who has the top most authority in functional organisation?