Amitai Etizioni contends “we are born in organisations, educated by organisations, and most of us

spend much of our lives working for organisations”

Organisation is considered
an activity / functions of management i.e. organising.
an ongoing business i.e. a unit, which is purposefully created to attain objectives with resources.
a static way representing a static structure of i, responsibilities of authorities. !
a process by which the structure is created, maintained and used.

Definations
“Organisation is defined as the structure and process by which ; cooperative group of human beings
allocates its tasks among its members, identifies relationship and integrates its activities toward
common objectives”.

W. Richard Scott: “Organisations are defined as collectivities that have been established ; for the
pursuit of relatively specific objectives on a more or less continuous basis”.

Pfiffner ad Sherewood : “Organisation is the pattern of ways in which large number of people, too
many to have intimate face-to-face contact with all others, and engaged in complexity of tasks, relate
themselves to each other in the conscious, systematic establishmeni and accomplishment of mutually
agreed purposes”.

Johnson, kast and Rsenzweig: “The organisation is an assemblage of people, materials machines and
other resources geared to task accomplishment through a series of interaction: and integrated into a
social system”;
Koontz and O’Donnel: “Organising involves the establishment of an intentional structure or roles through
determination and enumeration of the activities required to achieve the goals of an enterprise and each
part of it: the grouping of these activities, the assignment such groups of activities to manager, the
delegation of authority to carry them out, a provision for coordination of authority and informational
relationship horizontally a -vertically, in the organization structure”.

An organisation always refers to people; it is developed for people. People interact with one another in
some way or other in organisations. These interactions are specified by some sort of structure. These
interactions are ordered to achieve some specific joint objectives.

Organisation as a Process
Organisation as a process means identifying and grouping the activities to be performed, assigning duties
or responsibilities and delegating authority. It involves establishing relationships among the people for the
purpose of enabling them to work most effectively in achieving the objectives for which the organisation
is set up. Thus, organisation as a process refers to certain dynamic aspects like what tasks are to be
performed, who is to do them, how the tasks are to be grouped, who is to report tc whom and where the
decisions have to be made, etc. This process view includes both differentiation and integration of
organisational activities. As a process, the organisation function of management involves the following
steps.
(i) Identifying the work : The first logical step in the organisation is to identify the work that must be
done to achieve the organisational objectives. Every organisation is established to attain certain
objectives. The objective of a business unit is to produce and distribute goods and services and thereby
earn maximum profits. A hospital is established to provide medical care to the sick people. A cricket team
is established to play and win the matches. The work to achieve these objectives should be identified,
classified in a systematic way so th.-’t each person in the organisation gets a separate and distinct task.
(ii) Division of work : After identifying the work to be performed, the next step is to divide the work
systematically so that it can be distributed among the personnel in such a way that everyone gets his share
of work. Division and distribution of work is necessary because no one can handle the total work in an
organisation single-handed. The total work load of a distributive agency can be divided into purchase,
storage, display, advertising, sales, correspondence, accounting, etc.
(iii) Grouping the work : Division of work necessitates the grouping of work or to coordinate the
divided work. That is to say, similar activities are grouped together and departments are created. For
example, all the activities concerned with the purchases are kept under the head of purchasing
department, all the activities concerned with the finance and accounting are brought together under
‘Finance and accounting’ department etc. In order to provide for smooth flow of work, it is absolutely
essential to group the similar activities under one umbrella. Further, responsible people are asked to head
the concerned department that is created in this process. For instance, purchase department is headed by
purchase manager; accounting department is headed by the accountant; sales department is headed by. the
marketing manager, etc.
(iv) Assignment of duties : Not only that various departments are headed by competent individuals,
within each department duties are to be assigned to all the people. The assignment of duties to each and
every individual in the organisation should be appropriate, taking into consideration the qualifications and
experience, capacity of the people to perform the given tasks, etc.
(v) Establishment of formal reporting relationships : Another important step in the organising process
is the establishment of formal reporting relationships. This would help individuals to know what they
should do, how they should do the work, to whom the matters must be referred and how particular jobs
are related to each other, etc. Without establishing the formal reporting relationships, it becomes a
hotchpotch because no one knows who has to handle the work. Only by establishing the relationship
formally, people come to know who are their subordinates, who are their superiors, who are their peers,
etc. Similarly, each superior knows who are subordinates to him, whom to delegate the authority, etc.
(vi) Delegation of authority : Authority is the right to act, to issue orders and extract obedience from
others. Every manager shall be given sufficient authority without which he would not be able to perform
the given tasks with confidence and show results. Assignment of group activities to an individual should
necessarily be followed by delegation of authority to the person-in-charge or head of the department. Fof
instance, a finance manager shall be delegated authority to make payment to the dealer from whom the
goods are procured, to pay the salaries to the staff etc. Without authority being delegated to him, the
finance manager will not be in a position to discharge his responsibility.

Organisation as a Structure
Organisation as a structure refers to the network of relationships among individuals and positions in an
organisation. According to William Newman “organisation structure describes the organisation’s
framework. Just as human beings have skeletons that define their parameters, organisations have
structures that define theirs. It is like the architectural plan of a building”. Just as the architect takes
into account various factors like cost, special features needed, etc. while designing a good structure, the
manager also considers various factors like benefits of specialisation, communication problem in creating
authority levels, etc., before designing organisation structure.
According to classicists like Fayol, Weber and Taylor, structure is essential for achievement of
organisational goals. The concept of organisation as structure is also referred to as the static or classical
concept because it lays greater stress on the structure of relationships between the positions on one
hand and the jobs on the other.

Organisation, from the point of view of structure, implies the following things :- .
• Organisation is a purposive creation and the structure is a useful means of converting the disorganised
resources of men, machines, money, materials into productive enterprise.
• Structure, in general, takes the shape of pyramid. Though in social organisations the structural aspect
cannot be conceptually visualised, in business organisations the structural aspects can be inferred from the
actual operations and behaviour of the organisation itself.
• The structural relationships in an organisation can be shown through organization charts. These charts
depict the intended relationships at a given point of time.
• There are two dimensions of structure viz. vertical and horizontal. The horizontal aspects are
concerned with the basic departmentation whereas the vertical aspects of structure are related to the
creation of vertical channels of communication, hierarchy of superiors and subordinates.

As pointed out by W.G. Scott and T.R. Mitchell, ‘’organisation siructure is a method of reducing the
variability in behaviour of those who work for the organisation. It is a method of regulating behaviour in
order to achieve a common purpose in a coordinated manner”. Organisation structure is a means to an end
- a tool by which selected goals are attained effectively.

Different Organisation Structures

Line Organisation
Meaning
Line organisation is the oldest type of organisation structure. It is also known as military or ‘scalar’
organisation because it originated in the army. In line organisation there is an unbroken vertical line
through which authority flows from the top to the bottom of organisation. Every manager exercises
direct authority over his subordinates who are in turn directly responsible to their superior. There is thus
a hierarchical arrangement of authority. There are no separate supportive or service units for
accounting, labour, etc. Every manager is required to incorporate these activities in his department. For
example, the manufacturing manager himself has to arrange for the recruitment, selection and training of
workers for the production department. Each department is self-contained and works independently of
other departments. All departmental heads are supreme in their respective areas. Line organisation may be
of two types. In pure line organisation, all individuals at a given level perform the same type of work
and departments are created only to facilitate supervision and control. But in departmental line
organisation work performed in each department is of a different nature.

Line organisation has the following characteristics:

(i) Lines of authority are vertical flowing from top to the bottom,
(ii) The command is through a straight and unbroken line. Each subordinate receives orders from
one superior and is responsible to him alone.
(iii) All persons at the same level are independent of each other,
(iv) The authority and responsibility of each position is clearly specified.
(v) There are no staff specialists.

Advantages
Line organisation has the following merits:
1. Simplicity. Line organisation is the most simple to establish and operate. Lines of authority and
responsibility are direct, simple and clear. Every individual understands to whom he is responsible. The
authority and responsibility of every position is clearly defined. There is no confusion as to the role of an
individual in the organisation. . .,,
2. Prompt decision. Every manager can take decisions independently witnout consulting others. He has
not to depend upon others for advice, assistance or service. Therefore, decisionmaking process is easier
and less time-consuming.
3. Effective discipline. Each position is under the direct control of its immediate superior position.
Therefore, it is easy to maintain discipline among the people in the organisation.
4. Orderly communication. Communication between superiors and subordinates flows in a direct
vertical line. Such communication is easy to maintain and it is orderly in nature. It supports the authority
of the superior.
5. Unified control. Unity of command results in close personal contacts between superiors and
subordinates. Direct and close contacts facilitate effective supervision and control.
6. Economical. Line organisation is quite economical because staff specialists are not required.
7. Fixed responsibility. Every manager can be held responsible for the results of his unit.
8. Executive development. As every manager has to perform a variety of functions, there is an
opportunity for the development of all-round executives.
9. Co-ordination. As all activities relating to one department are managed by one person, co-ordination
can be effective.

Disadvantages
Line organisation suffers from the following drawbacks:
(i) Lack of specialisation. There is no scope for specialisation. A manager has to perform a variety of
functions which might not be interrelated. Every manager cannot be equally good in all the functions and,
therefore, the quality of management tends to be poor.
(ii) Overloading. As managers are overloaded with day-to-day work, they do not find time for
innovations and creativity and independent thinking.
(iii) Autocratic approach. The line of authority is direct and requires high level of obedience on the part
of subordinates. There is concentration of authority at the top and one-way communication. Managers at
the top may be devoid of the realities of the situation. As a result decisions may be arbitrary. There is
scope for favouritism.
(iv) Low morale. Subordinates are expected to carry out the decisions taken by superior. There may be
lack of initiative en the part of subordinates. Their opinions and grievances are not properly
communicated upward.
(v) Instability. The success and continuity of the organisation depend upon a few competent managers.
Succession problem is acute and there may be lack of continuity when key executives retire.
(vi) Rigidity. Discipline is emphasised so much that it may be difficult to change.

Suitability
Line organisation is suitable in the following cases:
(i) Where the business is carried on a small scale and few subordinates are employed.
(ii) Where the work is largely of routine nature and the methods of operation are simple.
(iii) Where continuous processes are employed, e.g., sugar industry.
(iv) Where automatic machines are used so that there is less demand on the expertise of foremen.
(v) Where it is not difficult for a manager to handle labour problems.

Functional Organisation Structure

As organisation grows in size, line organisation proves inadequate and it becomes necessary to introduce
specialisation. The functional organisation is based on the concept of ‘functional foremanship’ suggested
by F.W. Taylor. Under functional organisation the organisation is divided into a number of functional
areas. Each function is managed by functional expert in that area. Every functional area serves all other
areas in the organisation. For example, the purchase department handles purchases for all departments.
The executive in charge of a particular function issues orders throughout the organisation with respect to
his function only. For example, the personnel manager will decide the questions relating to salary,
promotions, transfers, etc., for every employee in the organization whether he is in production, sales or
any other department. Thus, an individual in the organisation receives instructions from several functional
heads. Every functional expert enjoys functional authority over subordinates in other departments. Within
a functional department every operating executive receives orders from several functional specialists. For
example, each foreman in the factory receives orders from factory superintendent, chief engineer,
chemist, etc.
Features
The main characteristics of functional organisation are as follows:
(i) The whole task of the enterprise is divided Into specialised functions. ;
(ii) Each function is performed by a specialist.
(iii) The specialist incharge of a functional department has the authority over all other employees for his
function.
(iv) Specialists operate with considerable independence.

Advantages
Functional organisation contains the following benefits:
1. Specialisation. Functional organisation promotes logical division of work. Every functional head is an
expert in his area and all workers get the benefit of his expertise. The importance of major functions is
recognised.
2. Reduction of workload. Every functional head looks after one function only and, therefore, burden on
top executives is reduced. Mental and manual functions are separated.
3. Better control. One man control is done away with and there is joint supervision of work. As a result,
functional control becomes more effective.
4. Easier staffing. Recruitment, selection and training of managers Is simplified because each individual
is required to have knowledge of one functional area only.
5. Higher efficiency. Every individual in the organisation concentrates on one function only and receives
the expert guidance from specialists. Therefore, efficiency of operations is high. There is scope for
functional improvements through application of expert knowledge.
6. Scope for expansion. The success and growth of the organisation is not limited to the capabilities of a
few line managers. Standardisation and specialisation facilitate mass production. A change can be
introduced without disturbing the entire organisation. There is flexibility.

Disadvantages
Functional organisation suffers from the following weaknesses:
1. Double command. A person is accountable to several superiors. As a result, his responsibility and
loyalty get divided. In the absence of unity of command, responsibility for results cannot easily be fixed.
There Is erosion of the authority of line managers.
2. Complexity. There are many cross relationships which create confusion. A worker may receive
conflicting orders. He cannot easily understand his place in the organisation. Discipline may be poor.
3. Delay in decision-making. A decision problem requires the involvement of several specialists.
Therefore, decision-making process In functional organisation is slow.
4. Problem of succession. Executives at lower level do not get opportunity of all-round experience. This
may create problem in succession to top executive positions.
5. Lack of co-ordination. A functional manager tends to have a limited perspective. He thinks only in
terms of his own department rather than of the whole enterprise. He may be jealous of his prerogatives
and fight to promote his own speciality. Inter-functional conflicts may arise due to narrow specialisation.
6. Expensive. As a large number of specialists is required, functional organisation is expensive.
Functional organisation is generally suitable for large and medium-sized concerns. But it should be
applied at higher levels because it does not work well at the lower levels.

Line and Staff Organisation

Line and staff organisation is a combination of line and functional structures. Under it, line authority
flows in a vertical line in the same manner as in the line organisation. In addition, staff specialists do not
have power of command over subordinates in other departments. They are purely of advisory nature.
When the work of line executives increases, they need advice, information and help of staff specialists.
Therefore, staff positions are created to support the line managers. Every staff specialist, however, has
line authority over the subordinates in his own department. For example, the chief accountant has
command authority over accountants and clerks in the accounts department. But he has only advisory
relationship with other departments like production, sales, etc.

Advantages
Line and staff organisation offers the following advantages:
(1) Expert advice. Line managers receive specialised advice and assistance from staff experts. They are
enabled to discharge their responsibilities more efficiently.
(2) Relief to top executives. Staff experts carry out detailed investigation and supply information to line
executives. Therefore, the burden of line executives is reduced. They get ample chance for creative
thinking to generate new ideas.
(3) Quality decisions. Staff specialists provide adequate information and expert advice. As a result line
executives can take better decisions.
(4) Training of personnel. As every executive concentrates in one field, he acquires valuable experience.
Young staff executives get opportunity of acquiring expertise in their respective fields of activity. There
are greater opportunities for advancement.
(5) Flexibility. Line and staff organisation is comparatively more flexible. As the organisation expands,
staff can be added to help the line managers. There is more opportunity for advancement because a
greater variety of responsible jobs is available. Stability of the enterprise docs not depend on top
executives alone.

Disadvantages
Line and staff organisation suffers from the following drawbacks:
1. Line staff conflicts. The main problem of line and staff organisation is that conflicts often arise
between line managers and staff specialists.
2. Confusion. In actual practice, it is often very difficult to define clearly the authority relationships
between line and staff. Different managers may not be clear as to what is the actual area of operations and
what is expected of them. In the absence of clear allocation of duties, co-ordination may be hampered.
3. Ineffective staff. Staff personnel are not accountable for the results. Therefore, they may not take their
tasks seriously. They may also be ineffective due to lack of command authority.
4. Expensive. Line and staff organisation is quite expensive for small firms because several experts have
to be employed. Despite these limitations, line and staff organisation is very suitable for large
organisations. It provides ample scope for specialisation without violating the unity of command. Its
success depends upon the degree of harmony that is maintained among the line and staff. However, it may
not be useful for small organisations which cannot take full advantage of staff experts.

Project Organisation
The traditional functional and line structures have been found inadequate in large multi-product firms
performing a variety of tasks. As organisations grow and diversify, managers working within such
structures find it increasingly difficult to keep abreast of new developments as well as to cope with
routine matters or operations. New forms of organisation, e.g. matrix, project, free form, task-force, etc.
have been developed to meet the new needs of business—to speed up decision-making and paper work.
These new forms provide for a horizontal grouping of a number of functions which may otherwise be
labelled as line or staff. Two such formats are project organisation and matrix organisation.
The project structure consists of a number of horizontal organisational units to complete projects of a long
duration. Each project is vitally important to the organisation. Therefore, a team of specialists from
different areas is created for each project. The size of the project team varies from one project to another.
The activities of the project team are coordinated by the project manager who has the authority to obtain
advice and assistance of experts both inside and outside the organisation.
The core of the concept of project organisation is to gather a team of specialists to work on and complete
a particular project. The project staff is separate from and independent of the functional departments. Fig,
1.5 presents a simple project structure wherein project managers form their own teams in addition to the
normal functional departments. Project organisation is employed in aero-space, aircraft manufacture,
construction and professional areas like management consulting. In such organisations, projects are
subject to high standards of performance and there is a strong emphasis on horizontal relations among
specialists. For example, Lockhead Corporation of U.S.A. makes extensive use of project structure for its
aircraft manufacturing programmes. In industrial concerns, project teams may be structured to facilitate
the designing and development of new products. Project management {moulding the Organisation around
specific projects) has been developed to deal with situations where production and marketing strategies
do not fit into a purely functional organisation. Generally, project organisation is appropriate when the
enterprise is undertaking tasks that have define goals, that are frequent and unfamiliar to the present
structure, that are complex due to interdependence of tasks and that are crucial to the success of the firm.
According to Terry “It is a preferred means whenever a well-defined project must be dealt with or
the task is bigger than anything the organisation is accustomed to.”
A project team is a temporary set-up. Once the project is complete, the team is disbanded and the
functioning specialists are assigned some other project.
Merits
Project organisation offers the following benefits:
(1) Project organisation provides concentrated attention that a complex project demands. It permits
the timely completion of a project without disturbing the normal routine of rest of the organisation. It can
be tailored to a particular mission or project to consolidate diverse actions towards the completion of the
project while retaining the advantages of functional specialists. It allows maximum use of specialised
knowledge.
(2) Project organisation provides a logical approach to any challenge in the form of a large project with
definite beginning, end and clearly defined result. It cuts manager’s job to a reasonable” level, spreads
decision-making and facilitates communications through lateral relationships.
(3) One reason for the success of project organisation is that the project often requires highly talented
professionals who find it difficult to work creatively in any structured set-up. The idea of being part of a
team of skilled professionals . working on a tangible project acts as a powerful motivator. Project
organisation encourages initiative and creativity on the part of project staff by giving them a free hand to
accomplish work.
(4) Project organisation has been found to fit a number of widely-varying situations, from building
contractors and advertising agencies to accounting and consulting firms. The increasing complexity of
projects that require the highly specialised experts and rapid changes from one project to another often
demand the flexibility provided by project structure. It accommodates the formal ideas of classical
thinking together with the team and participative ideas of behavioural contributions. :

Demerits
Thus, the project organisation provides flexibility, coordination of resources, fixation of responsibility
and check over project work. However, the project structure suffers from the following drawbacks:
(i) There is organisational uncertainty because a project manager has to deal with professionals drawn
from diverse fields. Often they differ in approach and interest. There is lack of clearly defined
responsibility, clear communication lines and measurement yardsticks. Lack of prescribed organisational
processes make the job of a project manager very frustrating. There is danger of over-specialisation. In
addition, lack of awareness of project problems and personal prejudices on the part of top people may
jeopardise a project.
(ii) A project manager is responsible for project outcomes. But the ongoing conventional organisation
does not give him unlimited authority. Therefore, budgets, manpower and control are serious problems.
(iii) Organisational uncertainties may lead to interdepartmental conflicts. People have fear of being
forgotten at the time of promotion due to separation from the main structure. There may be role conflicts,
poor loyalty and underutilisation of resources. Excessive supervision and multiple controls cause
frustration. Decisions may be based on scanty data due to pressures for completion of projects on time.
(iv) There is considerable fear among personnel that the completion of a project may result in loss of job.
The feeling of insecurity and varying status creates considerable worry about career progress.

Project organisation can be effectively applied under the following situations:

(a) The project offers a unique or unfamiliar challenge.
(b) The project has definite goals and well-defined specifications.
(c) Successful completion of the project is crucial to the organisation.
(d) The project is complex with interdependent tasks. :
(e) The assignment is to be completed within the given time limit.

Point of Difference Project Organisation Product Organisation

1. Basis Every project organised as a separate unit. Every product line organized as a separate
division;
2. Differentiation Various functional experts form the project Every product division has its production
team. and marketing facilities.
3. Responsibility for results Lies with the project manager. Lies with the product manager
4. Operational autonomy Very high High
5. Coordination Very simple Simple
6. Economy Economical Expensive
7. Flexibility More flexible Less flexible
8. Job security Low High
9. Time limits Specific starting and completion No specific time limits
Dates for each project
10. When useful Firms engaged in Project work. Multiproduct diversified firms.