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The Nature and structure of organizations

Updated on February 20, 2013


1- Organization

Perhaps the simple definition of the organization is

“A social arrangement which persues collective goals, controls its own performance and said to be a boundary separating it from its environment”

This is a simple definition of the organization based on the social aspect; early management theories neglected the social aspect of the organization and management. Modern theories replaced the early theories by embedding the social aspect in the new modern theories of organization and management.

The most important word in this definition is “Social” which means that an organization is consists of people, these people have to interact with each other like employees interaction with bosses and customers, and we have our own ambitions and motive all these are social aspects of an organization.

Another important aspect of the definition is “Collective Goals” which means that there has to be an assumption that each and every person in the organization is ultimately aiming to the same direction and end results, contrary to this is against the definition of the organization.

The one of the functions of the management is to arrange business and people in the organization so as every one traveling to the same direction and ultimately collective goals are established.

2- System

The definition of the organization included term “Boundary” and “Environment”, now question arises from where these terms come out and the answer is that these terms come out of the system theory.

The environment is where the organization sits and live, an organization may sit and live in country or national environment of international environment and the boundary separates environment from the organizational system, Input goes into the organization and some sort of processing take place to give some output.

An organization or system can be divided into following sub-systems

· Sales and marketing department

· Finance and accounts department

· Purchase department

· Manufacturing department

· And so on

Sub-systems than can be splitted into following further smaller sub-systems like

· Accounting department into Receivable ledger, payable ledger, cash book, Nominal ledger etc.

Some systems are known as “Closed Systems” they take no input from the environment and hence gives no output to it. These are based only on theories and do not compete successfully hence fail. It is very difficult for an organization to compete successfully if it does not pay attention to technological advance, rivals activities for competition and customers wants.

Open organizations on the other hand take input from the environment and produce output which is sent to the environment. In short words these organization play practically.

3- Types Of organization

Following are the types and characteristics of the organization

Commercial organization :A commercial organization is a profit seeking organization which includes sole traders, partnerships, limited liability partnerships and limited companies. The advantage of limited liability partnerships and companies is that in hard times if these type of organizations have to go under liquidation, the owners of the organizations are protected.

Creditors and defaulting banks have to persue only the assets of the organization not the personal assets of the owners. On the other hand the liability of the sole traders and partnerships is unlimited extending to the personal assets of the owners.

Not for profit organization : The example of not for profit organization is a charitable organization like a charitable educational institute, Instead of preparing profit and loss account they prepare income and expense account in which ultimately expenses exceed income and organization run out of funds and this gap is fulfilled by charity and donations etc.

Public sector organization : These type of organizations are state owned like defense department , health department , educational systems etc.These are owned by the state at national or local level. Sometimes businesses and industries also owned by the state like in some countries major airlines are completely state owned.

Non-government organization :A non-governmental organization (NGO) is an independent voluntary association of people acting together for some common purpose (other than achieving government office or making money). Their operation may extend to international levels, examples are many organizations of United Nation Organization.

Co-Operatives :These are owned by the people who work in the organization, in this type of organizations ownership is widely spreaded among those peoples who work in the organization. Some farmers for example set up co-operative to market their product.

4- Organization Structures

Organization structures can be described as follows:

· Entrepreneurial

· Functional

· Divisional or

· Matrix

Entrepreneurial structure :are very simple just like workers and boss sometimes family owned not large enough to be divided into many departments.

Functional structure :If business begin to grow it will develop a functional structure it means many departments are made. Expertise is hired for these departments to inject highly skilled expertise in each department to get full benefits of economy of scale. Departments are made according to function like accounts, finance, purchase, sales and marketing, research and development, humane resource. It is very efficient structure for an organization.

Divisional structure :if business continues to grow it is devisionalised it is splitted geographically or product wise for example an north American division and a European division.

It can have division which sales diary products and it may have division which sells cotton products or paint. The purpose behind divisionalisation is to achieve specialization. Marketing process, manufacturing process, competition and regulation will be different for each sector and hence it will be worthwhile to divisionalise to get full benefits of specialization.

Matrix organization : The example of the matrix organization is a project and its team , this type of organization have also functional aspect, like a project have a team leader and its members, all members report to team leader and also its functional head. It means each team member have two bosses to report one is the team leader and second is the functional head. A project will have a project accountant which will report to project head and also to its functional head. Classical theory thinks it unfair but in fact it depicts the actual picture of the pressure that team members have to bear.

5- Mintzberg’s Structure

Mintzberg divided an organization into five parts

1. Strategic apex

2. Middle Line

3. Operating Core

4. Support Staff

5. Techno Structure

Strategic apex includes top management and board of directors. Middle line includes the middle mangers some times called the scalar chain. Then hierarchy passes down and next part comes that is called operating core includes the people who perform day to day tasks and work , this part is at the bottom of the Mintzberg’s structure.

The supporting staff includes the accounting staff and perhaps the IT staff. The techno structure is the part of the organization responsible for devising and implementing standards and procedures in the organization.

The techno structure’s responsibilities may include the following

1. Writing of finance manual

2. Writing of employee book

3. Writing health and safety manual

4. Writing quality control manual etc

The following diagram explains the Mintzberg’s structure

The size and importance of the five parts of structure depends upon the size of organization , in an entrepreneur organization there will present only the strategic apex and operating core as this type of organization have only boss and employees hence there is no need of middle line, support staff and techno structure.

Interesting adaptation of the Mintzberg’s structure is what Mintzberg called professional organization like large firm of accountants and lawyers. In these organization middle line is much sorter and have close relationship with partners and people doing work in bottom line means operating core, this middle line communicate with operating staff who perform the work of audit , consultancy , book keeping, taxation etc. ,support staff is still quite large and surprisingly techno structure is very small.


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      Devika Primić 5 years ago from Dubrovnik, Croatia

      A well-presented on the The Nature and structure of organizations, you have made valuable points thanks for this interesting hub voted up!