Definition, Meaning & Characteristic of

Organisation

Meaning of Organisation:
Organisation is the foundation upon which the whole structure of management is
built. Organisation is related with developing a frame work where the total work
is divided into manageable components in order to facilitate the achievement of
objectives or goals. Thus, organisation is the structure or mechanism (machinery)
that enables living things to work together. In a static sense, an organisation is a
structure or machinery manned by group of individuals who are working together
towards a common goal.

Alike ‘management’, the term ‘organisation’ has also been used in a number of
ways. broadly speaking, the term ‘organisation’ is used in four different senses:
as a process, as a structure of relationship, as a group of persons and as a system,
as given below:

Organisation as a Process: In this first sense, organisation is treated as a

dynamic process and a managerial activity which is essential for planning the
utilization of company’s resources, plant an equipment materials, money and
people to accomplish the various objectives.
Organisation as a Framework of Relationship: In the second sense
organisation refers to the structure of relationships and among position jobs
which is created to release certain objectives. The definitions of Henry, Urwick,
Farland, Northcourt, Lansburgh and Spriegel Breach, Davis, Mooney and Reily
etc., come under this group. For example: According to Mooney and Reily,
“Organisation is the form of every human association for the attainment of a
common purpose.”
Organisation as a Group of persons: In the third sense, organisation is very
often viewed as a group of persons contributing their efforts towards certain
goals. Organisation begins when people combine their efforts for some common
purpose. It is a universal truth that an individual is unable ability and resources.
Barnard has defined ‘Organisation’ as an identifiable group of people
contributing their efforts towards the attainment of goals.
Organisation as a System: In the fourth sense, the organisation is viewed as
system. System concepts recognize that organizations are made up of
components each of which has unique properties, capabilities and mutual
 relationship. The constituent element of a system are linked together in such
complex ways that actions taken by one producer have far reaching effect on
others.
In short, organizing is the determining, grouping and arranging of the various
activities deemed necessary for the attainment of the objectives, the assigning of
people to those activities, the providing of suitable physical factors of
environment and the indicating of the relative authority delegated to each
individual charged with the execution of each respective activity.

Definitions of Organisation

Different authors have defined organisation in different ways. The main

definitions of organisation are as follows:

 According to keith Davis, “Organisation may be defined as a group of individuals,

large of small, that is cooperating under the direction of executive leadership in
accomplishment of certain common object.”
 According to Chester I. Barnard, “Organisation is a system of co-operative
activities of two or more persons.”
 According to Louis A. Allen, “Organisation is the process of identifying and
grouping the work to be performed, defining and delegating responsibility and
authority, and establishing relationship for the purpose of enabling people to
work most effectively together in accomplishing objectives.”
 According to Mooney and Railey, “Organisation is the form of every human
association for the attainment of a common purpose.”

Characteristics / Features of Organisation

 The main characteristics or Features of organisation are as follows:

 Outlining the Objectives: Born with the enterprise are its long-life objectives
of profitable manufacturing and selling its products. Other objectives must be
established by the administration from time to time to aid and support this main
objective.
 Identifying and Enumerating the Activities: After the objective is selected,
the management has to identify total task involved and its break-up closely
related component activities that are to be performed by and individual or
division or a department.
 Assigning the Duties: When activities have been grouped according to
similarities and common purposes, they should be organized by a particular
department. Within the department, the functional duties should be allotted to
particular individuals.
 Defining and Granting the Authority: The authority and responsibility
should be well defined and should correspond to each other. A close relationship
between authority and responsibility should be established.
 Creating Authority Relationship: After assigning the duties and delegations
of authority, the establishment of relationship is done. It involves deciding who
will act under whom, who will be his subordinates, what will be his span of control
and what will be his status in the organisation. Besides these formal relationships,
some informal organizations should also be developed.

Importance / Need / Advantages / Significance of Organisation

 The well-known industrialist of U.S.A. late Andrew Canrnegi, when sold his
famous ‘United State Steel Corporation’, showed his confidence in organisation
by uttering the following words, “Take away our factories, take away our trade,
our avenues of transportation, our money, leave nothing but our organisation,
and in four years, we shall re-establish ourselves.” Since ages and in every walk
of life, organisation has been playing a vital role. The significance or main
advantages of organisation are as follows:
 It Facilitated Administration and management: Organisation is an
important and the only tool to achieve enterprise goals set b administration and
explained by management. A sound organisation increases efficiency, avoids
delay and duplication of work, increases managerial efficiency, increases
promptness, motivates employees to perform their responsibility.
 It Help in the Growth of Enterprise: Good organisation is helpful to the
growth, expansion and diversifications of the enterprise.
 It Ensures Optimum Use of Human Resources: Good organisation
establishes persons with different interests, skills, knowledge and viewpoints.
 It Stimulates Creativity: A sound and well-conceived organisation structure
is the source of creative thinking and initiation of new ideas.
 A Tool of Achieving Objectives: Organisation is a vital tool in the hands of
the management for achieving set objectives of the business enterprise.
 Prevents Corruption: Usually corruption exists in those enterprises which
lack sound organisation. Sound organization prevents corruption by raising the
morale of employees. They are motivated to work with greater efficiency, honesty
and devotion.
 Co-ordination in the Enterprises: Different jobs and positions are welded
together by structural relationship of the organisation. The organizational
process exerts its due and balanced emphasis on the co-ordination of various
activities.
 Eliminates Overlapping and Duplication or work: Over lapping and
duplication of work exists when the work distribution is not clearly identified and
the work is performed in a haphazard and disorganized way. Since a good
organisation demands that the duties be clearly assigned amongst workers, such
overlapping and duplication is totally eliminated.

Sound or Good Organisation

 Organisation is not an end it itself but a means to achieve an end. Whether an

organisation is good or bad depends on the fact as to how much efficiently and
promptly it is in a position to achieve the objectives. An ideal organisation is one
which is expected by all. Some people think that an ideal organisation stands in a
dream only and actually it does not exist. However, it is a wrong concept. An ideal
organisation is a reality which can be achieved through the active cooperation of
all the members of an organisation and also by following the principles of
organisation is not an exact science as physics and chemistry. though a sound
organisation is mainly based on the active cooperation of all the members of the
organisation and on certain principles but also it is based on the capabilities of
the individuals available to work along with its simplicity and flexibility. An
organisation conceived and developed on the above lines will reward its leaders
and well as its members (Personnel). Not only will the objectives be achieved
more easily, and conveniently, but the physical operation of the organisation will
also be greatly enhanced. Thus, a sound or good or ideal and result-oriented
organisation must posses the following characteristics.
 Realization of Objectives: Organisation is tool of achieving objectives of an
enterprise. For this purpose, the organisation should be divided in several
department, sub-departments, branches and units etc.
 Harmonious Grouping of Functions etc: For achieving the organisation
objectives there must be harmonious grouping of functions, jobs and sub-jobs in
such a way so that there is action, consultation and co-ordination without any
delay and difficulty.
 Reasonable Span of Control: Another characteristic of organisation is that it
should have reasonable span of control. Ordinarily, a person (personnel) cannot
control more than five or six subordinates.
 Clear-cut allocation of Duties and Responsibilities: There must be clear-
cut allocation of duties and responsibilities in any scheme of sound organisation.
Every executive must know his scope of activities, the ideal number is three.
 Promotion of Satisfaction: The most important element of any human
organisation is the promotion of satisfaction of workers. Man works in a group or
in an organisation and hence the success or failure of any organisation depends
on as to how much the organisation is in a position to provide satisfaction to
individuals or group working under him.
 Fullest Utilization of Manpower: Another important characteristic of an
ideal organisation is as to how far it is successful in making fullest and economical
utilization of the available manpower.
 provision and Development and Expansion: Another important of an ideal
organisation is that there exists the necessary provision for development and
expansion so that it is possible to expand and develop any organisation according
to needs and requirements and necessary changes an alternatives may be made.
 Coordination and cooperation: In order to achieve the objectives of the
enterprise, there must be close coordination and cooperation in the activities of
everybody working in the organisation. Further, there should also be active
coordination and cooperation amongst the various departments an sub-
departments. It will also assist in elimination the evil of red tapism.
 Unity of Command: There must be unity of command. No one in any
organisation should report to more than one line supervisor, and everybody must
know to whom he reports and who reports to him. No subordinate should get
orders from more than one supervisor, otherwise it will lead to confusion, chaos
and conflict.
 Effective System of Communication: An ideal organisation must possess
effective system of communication. The inter-communication system should be
clear and easier and there should be no ambiguity at and level.
 High Morale: An ideal organisation is that in which the workers possess high
morale. They work with full capacity, energy, enthusiasm, devotion and sincerity.
 Flexibility: The last but not the least important characteristic of an ideal
organisation is that it should be flexible so that necessary changes an
modifications in the the size of the organisation as well as technology could be
easily and conveniently effected.

Principles of Organisation

 There is no unanimity as to number of principles of organisation amongst the

leading authors on the subject. L.K. Urwick, in his paper ‘Scientific Principles of
 Organisation’ (1938) and ‘Notes on the Theory of Organisation’ (1952) prescribed
ten principles of organisation. Thereafter, many other writers on the subject have
added a few more principles of organisation. The main principles of organisation
are as follows:
 The Principle of Objective
 Every enterprise, big or small, prescribes certain basic objectives. Organisation
serves as a tool in attaining these prescribed objectives. Every part of the
organisation and the organisation as a whole should be geared to the basic
objective determined by the enterprise.
 Principle of Specialization
 Precise division of work facilitates specialization. According to this principles
division of work between the employees must be based on their ability, capability,
tasks, knowledge and interest. This will ensure specialization and specialization
will lead to efficiency, quality and elimination of wastage etc.
 The Scalar Principle
 The principle is sometimes known as the ‘chain command’. There must be clear
lines of authority running from the top to the bottom of the organisation.
 The Principle of Authority
 Authority is the element of organisation structure. It is the tool by which a
manager is able to create an environment for individual performance.
 The Principle of Unity of Command
 One subordinate should be kept in the supervision of one boss only. This principle
avoids the possibility of conflicts in instructions and develops the feeling of
personnel responsibility for the work.
 The Principal Span of Control
 It is also known as ‘span of management’, ‘span of supervision’ or ‘levels of
organisation’, etc.
 The Principle of Definition
 The contents of every position should be clearly defined. The duties,
responsibilities, authorities and organizational relationship of an individual
working on a particular position should be well defined.
 The Principle of the Unity of Direction
 The basic rationale for the very existence of organisation is the attainment of
certain objectives. Major objective should be split into functional activities and
there should be one objective and one plan for each group of people.
 The Principle of Supremacy of Organisation Objectives
 The organisation goals and objectives should be given wide publicity within the
organisation. The people contributing to it, should be made to understand that
enterprise objectives are more valuable and significant and one should place one’s
personal motives under it.
 The Principle of Balance
 In every organisation structure there is need for balance. For effective grouping
and assigning activities, this principle calls for putting balance on all types of
factors human, technical as well as financial.
 The Principle of Human Element
 This principle indicates that the success or failure of an enterprise largely depends
on the handling of human element. If the organisation has sound labor policies
along with a number of welfare activities it is bound to succeed.
 The Principle of Discipline
 According to his principle, it is the responsibility of the management to maintain
proper discipline in the enterprise. Fayol considered discipline as ‘respect for
agreements which are directed at achieving obedience, application, energy and
outward mark of respect.”

Steps in the Process of Organisation

 Organisation means identifying, arranging and integrating different elements of

organisation into efficient working order. It requires the management to follow
the following process of organisation.
 Division of work
 The main function is divided into sub-functions and entrusted to the different
departmental heads. The result is the establishment of departments like
Purchase, Sales, Production, Accounts, Publicity and Public relations. The
departments can be further classified just as production department into (1)
Planning (2) Designing, (3) Operations, (4) Production Control and (5) Repairs
and Maintenance. The division of the work is based upon the fact that
specialization is keynote of efficient organisation.
 Grouping of Job and Departmentation
 The second step is to group similar or related jobs into larger units, called
departments, divisions or sections. Grouping process is called departmentation.
 The department may be based upon functions such as manufacturing, marketing
and financing etc. Department may also be based on products, such as textiles,
cosmetic, stationery etc. These departments may have different sections as per
requirement.
 Grouping jobs or Departmentation aims at achieving coordination and facilitates
unity of efforts. The departments are linked together on the basis of
interdependence. The divided task is assigned to specific individual or group of
 individuals who are supposed to be the most qualified and specialized persons for
the task.
 Assigning duties
 The work to be performed by every individual is clearly defined and made known
to him. Every one must know, what he is required to do in order to avoid any
misunderstanding, duplication or overlapping in the work.
 Granting authorities and fixing responsibilities
 Assigning of duties to individuals must coincide with the appropriate and relevant
authorities. Every employee must know, what the authorities granted to him and
for what and to whom he will be responsible, liable and accountable.
 Delegation of authority
 Those who are made responsible for specific tasks are given due authority. Both
responsibility and authority go hand in hand together. Reasonable powers are
delegated to heads and supervisory staff to enable them to do their work with ease
and efficiency.
 Effective communication
 Effective communication is the keynote of efficient organisation. There should be
proper arrangement of communication messages from executives to subordinates
and vice-versa. Proper communication system establishes harmonious
relationship between employees and enables execution of work in the right
manner at the appropriate time and in an atmosphere of perfect mutual
adjustment.
 Co-ordination of activities for common objectives
 Business activity is a team work or the group activity, so the efforts of every
employee must be co-ordinate effectively to achieve the common objectives of the
enterprise.

Structure of Organisation

 In order to achieve the desired goals, sound and effective organizational structure
is necessary. Organizational structure, as we know is the system of job positions,
roles assigned to these positions and specifying authority, responsibility and task
of every positions. The structure undoubtedly provides basic framework for
executive and employees to perform their task smoothly. The following points
must be taken into consideration while building organizational structure.

Considerations for Building Organizational Structure

 Job design
 Jobs should be designed in such a way, that job should have specified and defined
task to be performed. Jobs should be designed in such fashion that every
individual could contribute his maximum worth to the enterprise. The major and
related activities of the jobs should also be specified.
 Departmentation or Grouping of Identical Jobs
 Identical and similar jobs should be grouped together in a department and placed
under a departmental head. Such departmentation will help in building
coordination between different jobs and managers. Departments can be
established on different basis. It may have production, marketing and finance
departments, if it is based upon functions.
 Span of Control
 Under span of control, the number of employees and jobs managed by each
manager is specified. The chain of command is also clearly stated. It is specified
that who will report whom is the smooth performance of his duties. Effective span
of control avoids overlapping, duplication and confusion in the work.
 Delegation of Authority
 In order to get the job done properly and smoothly, requisite authorities are
granted to the managers. Authority is the power to command employees and
instruct them to do a piece of work. The authority empowers to know certain facts,
to enjoy privileged position and command respect and obedience from
employees. Delegation is no doubt, sharing task with requisite authority with
subordinates. As such the manger multiplies himself through delegation.
 (A) Functional Structure of Organisation
 Grouping together the entire work into major functional departments and
entrusting these departments to functional specialists is known as functional
structure of organisation. Each major function of the enterprise is organized as a
separate department. These departments may be engineering, production,
personnel, finance and marketing in a manufacturing company. If it is retail
stores, these departments may be purchase, sales and stores etc as per
requirement. The names of the departments can change as per the requirements,
nature and size of the enterprise.
 Major functions of the enterprise differ from each other on account of
technicalities involved, specialized education and training needed. However,
these functions have common goal of achieving maximum efficiency to maximize
overall returns of the enterprise. The functional heads are provided functional
authority over the subordinates under their command.
 Functional organisation is the developed form of Taylor’s functional
foremanship. In practice, modern functional organisation is restricted to top level
 of the organizational structure and not carried down to the lowest level as
recommended by Taylor.
 Functional structure of organisation is extensively used these days by almost
every enterprise at different levels. The sales, production, finance and marketing
functions are so widely recognized that almost every enterprise uses it as the basis
of Departmentation.
 Functional Organisation Structure diagram.
 (B) Divisional Structure of Organizations
 Grouping of activities or Departmentation on the basis of product lines and areas
is known as divisional structure of organisation. Divisional structure has been
finding favor with the multiple large scale enterprise. Under this structure the top
level delegates extensive authorities to the divisional heads. The divisional head
is the in charge of the manufacturing, purchase, sales, engineering and other
departments of the division under his command. He is also made responsible for
the profit or loss of his division.
 Product and product line is an important basis for Departmentation. It facilitates
the use of specialized and specialist services of the divisional managers in their
product line. He can use his personal skill and his specialized knowledge for the
development of his department.
 Organizations having their business all over the country may adopt divisional
structure on the basis of area, such as north division, south division, east, west
and central division. The organisation structure of LIC and Railways is also upon
divisional structure.
 The manufacturing enterprise producing variety of goods may have different
division for different products such as textile division, plastic division, stationary
division etc.