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1. Welingkar’s Distance Learning Division
CHAPTER-07
ORGANIZATION
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2. Welingkar’s Distance Learning Division
Introduction
• Organization is a mechanism or structure which helps
the activities to be performed effectively. The
Organization is established for the purpose of achieving
the business objectives. Wherever may be the business
objectives, there is a need of an organization.
• The word ‘organization’ is derived the word ‘organism’
which means an organized body with connected
interdependent parts sharing common life.
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3. Welingkar’s Distance Learning Division
TRANSLATION
He who does not make people
anxious and does not himself
become anxious easily either; and
he who is eithout joy, anger, fear or
anxiety,:is my loved one.
INTERPRETATION
A good manager myst be calm and
level-headed in all the situations.
He should not be easily irritated or
frustrated; not should he irritate or
frustrate others.
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4. Welingkar’s Distance Learning Division
Meaning
• Organization can be compared to a human body. The
human body consists of hands, feet, eyes, ears, nose,
fingers, mouth, etc. These parts are performing their
work independently and at the same time, one part
cannot be a substitute to another. The same
principles can be identified in the organization also.
• Each department performs its work independently
and be a substitute to another.
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5. Welingkar’s Distance Learning Division
Definition
• Organization is a harmonious adjustment of
specialized parts for the accomplishment of some
common purpose.
• “Organization is that process of identifying and
grouping the work to be performed, defining and
delegating responsibility and authority and
establishing relationships for the purpose of enabling
people to work most effectively together in
accomplishing objectives.”
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6. Welingkar’s Distance Learning Division
Functions of organization
• Determination of activities
• Grouping of activities
• Allotment of duties to specified persons
• Delegation of authority
• Defining relationship
• Co-ordination of various activities
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7. Welingkar’s Distance Learning Division
Principles of organization
• Principles of definition
• Principle of objective
• Principle of specialization or division of work
• Principle of coordination
• Principle of efficiency
• Principle of efficiency
• Principle of uniformity
• Principle of correspondence
• Principle of unity of command
• Principle of balance
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8. Welingkar’s Distance Learning Division
Principles of organization
• Principle for responsibility
• Principle of explanation
• Principle of authority
• Principle of leadership facilitation
• Principle of equilibrium balance
• Principle of continuity
• Principle of span of control
• Principle of exception
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9. Welingkar’s Distance Learning Division
Principles of organization
• Principle of flexibility
• Principle of principle
• Principle of simplicity and homogeneity
• Principle of unity of direction
• Principle of joint decision
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10. Welingkar’s Distance Learning Division
Nature or Characteristics of Organization
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Division of
labour
Authority
responsibility
structure
Communication
ORGANIZATION
Coordination
Objectives

11. Welingkar’s Distance Learning Division
Importance of Organization or
Advantages of Organization
• Facilitate administration
• Increases the efficiency of management
• Facilitates growth and diversification
Ensures optimum utilization of material
resources and human efforts
• Adoption of new technology
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12. Welingkar’s Distance Learning Division
Importance of Organization or
Advantages of Organization
• Places proportionate importance to the various
activities of the enterprise
• Encourage creativity and initiative
• Facilitate coordination
• Facilitate training and development of managerial
personnel
• Prevents the growth of secret, influence and
corruption
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13. Welingkar’s Distance Learning Division
Classification of organization
A. Formal
B. Informal
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14. Welingkar’s Distance Learning Division
Formal organization
• The formal organization represents the
classification of activities within the
enterprise. Indicates who reports to whom
and explains the vertical journal of
communication which connects the chief
executive to the ordinary and workers.
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15. Welingkar’s Distance Learning Division
Characteristics of formal organization
• Properly planned, based on delegated
authority, deliberately impersonal,
responsibility and accountability at all levels
of organization should be clearly defined.
• Organizational charts are usually drawn.
• Unity of command is normally maintained.
• It provides of division of labour.
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16. Welingkar’s Distance Learning Division
Advantages of formal organization
• The definite boundaries of each worker is clearly fixed. It
automatically reduces conflict among the worked.
• Overlapping of responsibility is easily avoided.
• Buck passing is very difficult.
• A Sense of security arises for from classification of the
task.
• There is no chance for favoritism in evaluation and
placement of the employee.
• It makes the organization less dependent on the task.
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17. Welingkar’s Distance Learning Division
Arguments against formal organization
• In certain cases, the formal organization may reduce
the spirit initiative.
• Authority is for the sake of convenience of the
employee without considering the need for using the
authority.
• It does not consider the sentiments and values of
the employees in the social organization.
• The formal organization may reduce the speed of
informal communication.
• It creates the problems of coordination.
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18. Welingkar’s Distance Learning Division
Informal organization
• Informal organization is an organizational structure
which establishes the relationship on the basis of the
likes and dislikes of officers without considering the
rules, regulations and procedures. The informal
organization relationship exists under the formal
organization the informal organization relationship
or informal relation give a greeter job satisfaction
and result in maximum production.
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19. Welingkar’s Distance Learning Division
Characteristics of informal organization
• Informal organization arises without any
external cause. i.e. Voluntarily.
• it is social structure formed to meet personal
needs.
• Informal organization has in the organization
chart.
• It acts as an agency of social control.
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20. Welingkar’s Distance Learning Division
Characteristics of informal organization
• Informal organization can be found all levels
of organization within the managerial
hierarchy.
• Informal organization develops from habits,
conduct, customs and behavior of social
groups
• There is no structure and definiteness to the
informal organization
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21. Welingkar’s Distance Learning Division
Advantages of informal organization
• It fills the gaps and deficiency if the formal
organization.
• Informal organization gives satisfaction to the
workers and maintains the stability of the
work.
• It is useful channel of communication.
• The presence of informal organization
encourages the executives to plan the work
correctly and act accordingly
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22. Welingkar’s Distance Learning Division
Disadvantages of informal organization
• It has the nature upsetting the morality of the
workers.
• It acts according to mob psychology.
• Informal organization indirectly reduces the
efforts of management to promote greater
productivity.
• It spreads rumor among the workers
regarding the functioning of the organization
unnecessarily.
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23. Welingkar’s Distance Learning Division
Difference between formal and informal
organization
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Sr. Formal Organization Informal Organization
1 It arises due to delegation of
authority
It arises due to social interaction
of people
2 It gives importance to terms of
authority and functions
It gives importance to people and
their relationship
3 The formal authority is attached
to a position.
No such authority is attached to a
person.
4 It is created deliberately It is spontaneous and natural
5 Rules, duties and responsibilities
of workers are given in writing
No such rules and duties followed
in informal organization.

24. Welingkar’s Distance Learning Division
Difference between formal and informal
organization
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Sr. Formal Organization Informal Organization
6 Formal organization comes from
outsiders who are giving in writing.
Informal organization comes from
those persons who are objects of its
control.
7 Formal authority flows from
upwards to downwards
Informal authority flows upwards to
downwards or horizontally.
8 Formal organization may grow to
maximum size
Informal organization tends to remain
smaller.
9 It is created for technological
purposes
It arises from man’s quest for social
satisfaction
10 Formal organization is permanent
and stable
There is no such permanent nature
and stability.

25. Welingkar’s Distance Learning Division
Theories of organization
1. Classical theory
2. Neo-classical theory
3. Modern theory
4. Motivation theory
5. Decision theory
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26. Welingkar’s Distance Learning Division
Classical theory
• Division of labour:
• Scalar of functional processes:
• Structure;
• Span of control
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27. Welingkar’s Distance Learning Division
Characteristics of classical theory
• It is based on division of labour, objectives
and tasks of organization, Co-ordination of
efforts.
• It is concerned with formal organization.
• it believes in human behavior of the
employees.
• It fixes a responsibility and accountability for
work completion.
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28. Welingkar’s Distance Learning Division
Criticism of classical theory
• This theory is based on authoritarian
approach.
• It does not give two easy communications.
• It ignores the influences factures on individual
behavior.
• The generalizations of the classical theories
have not been tested by strict scientific
methods.
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29. Welingkar’s Distance Learning Division
Neo-classical theory
Contributions of neo-classical theory
• Person should be the basis of an organization
• Organization should be viewed as a total unity.
• Individual goals and organization goals should be
integrated.
• Communication should be moved from to top and
from top to bottom.
• Members usually belong to formal and informal
groups and interact with others within each group or
sub-group.
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30. Welingkar’s Distance Learning Division
• Motivation theory: It is concerned with the
study motivation of employees.
• Decision theory: Decision theory is on the
bases that at all the levels the decisions are
taken.
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