3.

INDUSTRIAL
ORGANIZATION
1
3.1 INTRODUCTION
Every business needs to be organized for
effective and efficient performance.
Once the objectives, strategies and necessary
plans to carry out are formulated, the next
phase in management process is that of
organization.
Organization is thus a function of management
which basically deals with the establishment of
organizational structure.
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Organization is a backbone of management
which establishes relationship between
people, work and resources.
Organization involves division of work among
people whose efforts must be coordinated to
achieve specific objectives and to implement
predetermined strategies.
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3.2 DEFINITIONS OF ORGANIZATION
A process of
Identifying and grouping the work to be
performed,
Defining and delegating the responsibility and
authority, and
Establishing the relationships for the purpose of
enabling people work efficiently together in
accomplishing objectives.
The form of every human association for the
attainment of a common purpose.

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3.2 DEFINITIONS OF ORGANIZATION
A system of cooperative activities of two or
more persons.
A process of defining and grouping the
activities of an enterprise and establishing the
authority relationship among them.
The grouping of activities necessary to
accomplish goals and plans, and assignment
these activities to appropriate departments and
positions for authority delegation and
coordination.
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ORGANIZATION
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3.3 SYSTEM APPROACH APPLIED TO ORGANIZATION
A business organization can be looked up on
as an open system as it influences and is
influenced by its environment continuously.
It receives input from the society in the form of
men, materials, machinery, information,
thoughts, energy and finance. By utilizing the
efforts and skills of the persons, the raw
material is converted in to output of goals and
services required by the customers.
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The working of one part of the system is
dependent on the working of other parts of the
system.
The changes in the environment affect the
performance of the system process.
Environment of organization consists of
economic, social, cultural, political, legal,
technological, etc.

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ORGANIZATION
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The feedback of information and results is
utilized for corrective action. The feedback
may be in the form of orders, customer
complaints, sales, etc. This information is fed
at the control points and conversion
processes.

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Input
Conversion
Process
Output
Feedback

Fig. 3.1 System Approach Applied to Organization
Environment
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3.4 NECESSITY OF ORGANIZATION
A good organization is necessary for the following
reasons:
Complexity of industry-increasing size,
introduction of modern machines, labour
problems, ...
Growing competition-tough competition existing
in market,
Optimum utilization of resources-men,
materials, machines, can be used efficiently if
there is organization.

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3.5 ESSENTIAL ELEMENTS OF GOOD ORGANIZATION
The essential elements of good organization are:
It must be helpful in achieving objectives,
There must be a harmonious grouping of
activities,
The activities of the organization must be
coordinated properly,
An organization must be complete in all
respects, should include all the essential
activities, there should not be repetition of
activities,

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3.5 ESSENTIAL ELEMENTS OF GOOD
ORGANIZATION
An organization should have an effective
system of communication,
The span of control should be reasonable,
Provision of expansion should be there,
Clear and well defined policies and
procedures,
Employees satisfaction is essential,
Proper division of authority and responsibility.

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3.6 THE PROCESS OF ORGANIZATION
The logical steps involved in the process of
organization are:
Determination of objectives, strategies, plans and
policies,
Determination of activities,
Separation and grouping of activities,
Delegation of authority and responsibility,
Establishing inter-relationships,
Providing physical facilities and proper environment,
Preparation of organization chart.
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3.7 PRINCIPLES OF ORGANIZATION
Some of the important principles to be followed
for developing sound and efficient organization
structure are:
Consideration of unity of objectives
Principle of authority
Principle of coordination
Principle of unity of command
Principle of span of control
Principle of exception

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3.7 PRINCIPLES OF ORGANIZATION
Principle of flexibility
Principle of simplicity
Principle of responsibility
Principle of balance
Principle of continuity
Principle of scalar chain
Principle of parity between authority and
responsibility
Principle of efficiency
Principle of communication
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3.8 ORGANIZATIONAL STRUCTURE
Organizational structure is a skeleton or
framework that divides the total activities in to
related groups, develops superior and
subordinate relationships among the persons
by prescribing the authorities.
Thus it indicates the hierarchy, authority
structure and reporting relationships.

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There are three main types of organizational
structure:
i. Functional structure,
ii. Divisional structure and
iii. Matrix structure.
Each structure has its own strong and weak
points.

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i. Functional Structure
The employee will work in departments based on
what they are doing.
It enhances the experience of each function.
It saves us money because of the economies of
scale.
It makes the coordination between different
departments more difficult than other structures.
It also does not allow for flexibility because of the
centralization.

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Fig. 3.2 Functional Organizational Structure
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ii. Divisional Structure
Divisional structure divides the employees based
on the product/customer segment/geographical
location.
This structure is a decentralized structure and
thus allows for flexibility and quick response to
environmental changes.
It also enhances innovation and differentiation
strategies.
On the other hand, this structure results in
duplication of resources.
It does not support the exchange of knowledge
between people working in the same profession.
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Fig. 3.3 Divisional Organizational Structure
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iii. Matrix Structure
Matrix structure combines both structures.
Some employees will have two managers:
functional manager and product manager.
This type of structure tries to get the benefits
of functional structure and also of divisional
structure; however, it is not easy to
implement because of the dual authority.
This structure is very useful for multinational
companies.
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Fig. 3.4 Matrix Organizational Structure