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Meaning, types and bases

Chapter 8

As per the dictionary, an organisation is the work of connecting interdependent parts so that each
has a special function, act, office or relation to the whole. Modern civilisation is nothing but a
complex of organisations to meet the varied and diverse needs of the people. Organisations
provide the medium through which the efforts of the people working in them are coordinated,
hence leading to increase in output.

Herbert A. Simon has concluded that organisation affects the people working in it in five different

1. The organisation divides work among its members, by giving each employee a particular task,
it limits and concentrates his attention on that task.

2. The organisation establishes standard practises

3. The organisation transmits authoritative decisions by despatching such decisions downwards,

upwards and laterally

4. The organisation provides a communication system

5. The organisation trains and indoctrinates its members by providing for the internalisation of
influence relating to knowledge, skills and loyalties

In a static sense, an organisation is a structure mannered by a group of individuals who are
working together towards a common goal. In a dynamic sense, organisation is a process of
welding together a framework of positions which can be used as a management tool for the
achievement of the goals and objectives of an enterprise. It is the process of determining,
arranging, grouping and assigning the activities to be performed for the attainment of objectives.

According to Chester Barnard, “Organisation is a system of consciously coordinated

activities or forced of two or more persons.”

According to Mooney and Reilay, “ organisation is the form of every human Association
for the attainment of common purpose.”

It is clear from these definitions that organisation consists of structure, working

arrangement between the people who work in the organisation and relationship between
them. An organisation is the rational coordination of the activities of a number of people
for the achievement of some common goal. This coordination is achieved through division
of labour and a hierarchy of authority and responsibility.

Elements of organisation:
There are five inherent elements common to all:

1. Objectives— an organisation comprises of a group of people who cooperate in order

to accomplish their common goal

2. Specialisation— in an organisation, the work is distributed so that workers can

specialise in their respective fields

3. Coordination— coordination is of utmost importance in an organisation. The efforts

of workers specialising in various tasks must be effectively interrelated.

4. Hierarchy— Each organisation has a distant hierarchy. There are clear and
established channels of command, communication and control

5. Authority— in an organisation authority is fixed and directions come from the person
with authority. He also resolves differences among workers.

Signification of organisation:

1. Provides direction to human efforts: organisation provides direction to human efforts

so that they can be more effective and productive and achieve better results

2. Increases efficiency : avoids delays, confusion and misunderstandings

3. Establishes hierarchy : adds definiteness to the activities by allocating the duties and
responsibilities clearly

4. Enables effective and fast communication : this can be achieved by assembling,

integrating, and coordinating all activities into a complete whole. A sound
organisation evolves a effective communication system

5. It fixes responsibility : prevents shirking of responsibilities and thus secures certainty

and promptness in the accomplishment of tasks

6. Facilitates coordination : by welding together the structural relationships

7. Facilitates goal achievement : through cooperation and coordination the goals or

objectives of the organisation are achieved efficiently.

8. Ensures optimum use of resources : by placing proportionate importance on various

activities, men and money.

Types of Organisation

Formal Organisation Informal Organisation

Formal Organisation
These are deliberately planned, designed and duly sanctioned by the competent
authority. Members in a formal organisation are assigned authority through a formal
system of rules and regulations.

For example-university is a formal organisation governed by the university calendar,

approved by a competent authority.

It is a system of well-defined jobs in the prescribed pattern of communication,

coordination and delegation of authority. It is consciously brought into existence for
predetermined objectives and is designed to enable the people in the organisation to
coordinate their efforts effectively in order to achieve those objectives.

According to Chester Barnard, “Formal Organisation is a system of consciously

coordinated activities or forced of two or more persons towards a common objective.”

Characteristics of a Formal Organisation:

1. Formal structure: It has a clearly defined structure of activities which is determined by
the top management. It has a formal structure of well defined jobs, each bearing a
definite measure of authority responsibility and accountability.

2. Legal Status: this is backed by legal sanctions. The establishment of any organisation
at the government level requires the enactment by parliament or legislature. The law
which enables the organisation to come into existence also confers authority. The
personnel working in the various departments, in the discharge of their official work
are backed by the authority of law

3. Division of work: one of the key characteristics of f.org. this indicates the level of
management, designation of officers and their area of operation makes it very
convenient for the division of work

4. Primacy of structure : main focus is on the structure. The structure is clearly defined
and the roles of individuals working in organisations is clearly spelled out.

5. Permanence : relatively more permanent than others

6. Rules and regulations: function in accordance with well formulated rules and

7. Centralisation : the decision making is centralised at the top and the communication is
mostly downward between the superior and his subordinates.

Merits of formal organisation :

• Individuals are selected on the basis of their ability to perform expected tasks

• They follow a hierarchy

• Activities of group and individuals become more rational, stable and predictable

• Treatment becomes more democratic

• Facilitates determination of goals and objectives in the absence of which it would be

difficult to direct skills of men and women to accomplish the stated goals

• It spells out the nature and scope of activities of the activities of different units within
the organisation

• Facilitates coordination

• Impersonal relationship

Demerits of formal organisation :

• Sometimes authority and hierarchy become very binding, seem inflexible and do not
easily adjust to changing needs.

• Employees get compartmentalised

• The rigid hierarchy is seen to discourage original and creative ideas and individual

• Strict adherence to formal lines of communication may slow down or discourage inter
personal communication amongst individuals working in the organisation

• Human element stands neglected here

• Human beings are treated like machines

• Economic incentives play a prominent role

Informal Organisation:
These are found in those aspects of structure which, while not prescribed by a formal
authority, supplement or modify the formal structure. These come into existence due to
social interactions and interpersonal relationships and exist outside the formal authority
system, w/o any set rigid rules. It exists in the shadow of formal structure, as a network of
personal and social relations, which must be understood and respected by the
management.Informal organisation refers to the relationship between people in the
organisation based on personal attitudes, emotions, prejudices, likes, dislikes etc. an
informal organisation is an organisation which is not established by any formal authority,
but arises from the personal and social relations of the people.These relations are not
developed according to procedures and regulations laid down in the formal organisation
structure; generally large formal groups give rise to small informal or social groups. These
groups may be based on same taste, language, culture or some other factor. These
groups are not pre-planned, but they develop automatically within the organisation
according to its environment.

According to Chester Barnard, ‘Informal organisations brings cohesiveness to a formal

organisation, a feeling of belonging, of status, of self respect and of gregarious

In any organisation, in addition to the formal channels of communication, the officers also
rely upon informal communication. The actual working of any organisation is not
according to the formal plan. The informal relationship of the persons working in the
organisation may be different from the formal expected relationship. It is always better to
encourage healthy informal relationships and personnel in an organisation.

Characteristics of informal organisations :

- These evolve naturally whenever people interact with one another over an extended
period of time.

- The members think and act alike. Their association leads to the development of shared
values & norms

- Enforces its values and standards of behaviour amongst its members. These
organisations have effective means of punishing those who do not conform.

- Informal style of leadership is the hallmark of these. The members follow the leader
because of his influence and he must live upto the expectations of the other members.

- They have a distinct status system. These are created which facilitates the operation of
the organisation by providing status, rewards, goals and satisfaction to the members.

- It protects the members against any pressure, injustice or danger particularly from the


A. Prevents dehumanisation and caters to the social needs of man. Every member gets
the element of human consideration which boosts his self image and personality

B. Develops a sense of belongingness amongst its members leading to a feeling of

social integration and social security

C. News travel very quickly via informal organisation. It is the best means of human

D. These serves as an effective regulator of human behaviour.

E. They’re a check on unlimited use of mangers authority and forced him to act

F. They provide support to the formal structure. It blends with the f.org to make a
workable system in order to achieve goals

G. This is a forum of specialisation of new employees and for helping them to learn the
work practises and rules


1. Conflicting norms or values : these uphold individual and social goals of its members
which oppose the goals of the f.org due to which the efficiency of the org is reduced

2. Prone to rumours and inaccurate information : these often carry rumours or false
information which prevents smooth functioning of the organisation

3. Power politics : the informal leader may manipulate the group toward selfish and
undesirable ends. It suffers from petty jealousies and diverts the members from
productive work of the org

4. Resistance to change : these tend to perpetuate status quo. They resist changes
which are perceived as threats to their group relationship or culture

5. These organisations can prove to be non productive when they’re formed by shirkers
who like to do away with their time

6. Due to lack of clear and a well defined structure , It is very difficult to fix
responsibilities in an informal org.

7. Insistence of conformity to group standards has serious repercussions on the goal

achievement of the org as this leads to pressure on the individuals to restrict their

Formal Organisations Informal organisation

Created deliberately as it is an artificial structure of It arises spontaneously as it grows naturally due to

roles and relationships around a set of goals and peoples need for interaction and association.


It is planned and official and is backed by legal It is unplanned and unofficial and is ever evolving
status social, and interpersonal relationships which are
bound by the unwritten norms of behaviour

These have large groups of people working They’re of small groups which are formed due to
together to achieve all defined goals or objectives social interactions catering to the social-
psychological well being of its members.

They’re stable as they are formed and sustained by They’re dynamic as they’re based on the volatile
clear cut rules and regulations which are more or social relationships which are ever evolving and
less permanent in nature prove to situation changes

These have a definite structure which are rational These are structureless and Is based on emotional
and mechanical in design, the jobs and roles are and personal interactions amongst members and
well defined and based on authority. unwritten norms of behaviour

They’ve clearly etched goals and objectives to Their goal is primarily to achieve satisfaction of its
achieve and they’ve a relevance to society. The members and to satisfy their individual needs. The
goals are social, economic and technical in nature. goals are psychological in nature.

The leaders or managers have legitimate authority The leaders have power based on their personal
to give directions. Downward communication charisma social power or status in the informal
system is followed. group

official and well defined paths are followed to Unspecified channels or paths are followed
achieve goals and objectives

Slow exchange of information Works like a grapevine resulting in faster news


They’re depicted on organisational charts They cannot be shown on organisational charts

They’re based on division of work and These are based on human relationships and social
specialisation interactions

The rewards and sanctions are monetary in nature The rewards and sanctions are non monetary

An analysis of informal organisation would help the management to maintain conducive

atmosphere, resulting in the achievement of organisational goals, as well as helping in the
fulfilment of individual goals. The task facing administrators of today is to skilfully blend
together the formal organisational with the informal to minimise conflict and encourage
coordination. The administration should encourage the informal organisations for
maintaining harmonious relations in the organisation and for achieving the organisational

Bases of organisation
According to Luther Gullick, in modern times we find four bases for forming an
organisation. These are- Purpose, Process, Person and Place. Gullick calls these the 4P

1. Purpose or functional base : it means the objective of the service rendered or purpose
to be achieved. Most governmental departments are organised on the base of

2. Process : it means a technique or skill or more or less of a specialised kind

3. People : it means the clientele or the body of people to be served.

4. Place or Area : these may be the bases of org

Purpose or functional base

By function we mean the major purpose is to be achieved or the service to be rendered.
Most of the organisations in the modern governments follow functional principle. Purpose
or objective is common to all organisations, in fact it is the starting point of any
organisation. A major function is often made up of a number of minor ones or sub
functions. So, within the primary functions we find sub-functions.

For example: education includes higher education, secondary education, primary

education, technical and professional education.


⁃ Avoids duplication

⁃ It is comprehensible

⁃ There is better team work and coordination

⁃ Leads to better discipline and fixing of responsibility

⁃ Every department has a mission

⁃ Skilled development


⁃ Function is a flexible term and does not carry exact meaning

⁃ It does not entirely eliminate overlapping

⁃ It created a separatist tendency in the personnel of a purpose based department

⁃ Small type of work gets ignored

⁃ Ignores new technology


Process means the work techniques or a specialised work skill that is used in doing a
certain type of function

Eg- space, law, etc


⁃ makes maximum use of your to date technical skill and automation

⁃ Facilitates specialisation and proves to be beneficial for the whole organisation

⁃ Generates coordination and uniformity

⁃ Fosters professionalism

⁃ Ensures efficiency and economy

⁃ Avoid duplication

⁃ Provides best opportunities for making of specialisation and for allowing specialist
to practice and develop their skill


⁃ Can’t be applied in non technical activities

⁃ Gives more importance to the process than the result

⁃ Neglects then service of bureaucrats

⁃ Coordination becomes a Herculean task

⁃ Over emphases on technical services at the cost of others deviates is from the main
path of achieving the desired objectives and providing services to the community at

Person or clientele or target group

The third base is gang of persons. Clientele organisations are built around the need to
serve a particular group of people.


⁃ establishes close relationship between the organisation and its clientele

⁃ Facilitated coordination

⁃ Eliminates overlapping

⁃ Facilitated better understanding in solving problems

⁃ Makes one agency responsible for all the needs of a group


⁃ Creation of a large number of small departments

⁃ Clientele organisation tend to become highly vulnerable to improper influences and

pressures from the groups that it serves

⁃ It creates problems of inter departmental coordination and jurisdictional disputes

⁃ It may be hard to apply since citizens fall into overlapping categories

⁃ offers few opportunities for utilising specialised services


Place means the geographic area covered by an organisation. Organisation based on

place, area of territory are structured primarily toward serving that particular local.

These organisations may utilise a variety of processes and strive to accomplish a variety
of purposes.


⁃ adopts then total policies and programmes to the particular needs of the area serves

⁃ Allows greater coordination

⁃ Economical

⁃ Government creates an administrative structure which is autonomous and has

sufficient powers to tackle the problems of specified areas


⁃ makes it difficult to maintain uniformity in the administration of national policies

⁃ Encourages regionalism and disrupts the national outlook and solidarity

⁃ May be vulnerable to improper influences of the local pressure groups from the area
it serves

⁃ Makes the organisation incapable of specialisation

⁃ Encourages shortsighted management geared to local problems

⁃ Fosters colonialism at the cost of national outlook