What is Organization? Definition, Features, Types, Examples, and Importance

What is an Organization?

An organization is a group of individuals who come together with a shared purpose and establish a legal entity to achieve specific goals and objectives. It can also be called a company, firm, institution, or association.

Think of it as a structured system that brings people together in a formal way, guiding their interactions and relationships. Within an organization, tasks, and responsibilities are divided among employees, ensuring that everyone’s efforts are coordinated towards the overall success of the company.

Organizations are formed when people with shared goals and objectives come together. They establish structured relationships where individuals have specific roles, authority, and responsibilities. These relationships are governed by rights and duties assigned to each person.

The organization serves as a foundation for implementing management practices, utilizing the division of work, assigning authority and responsibility, and all other its fourteen principles. Different employees, departments, and units are given specific tasks, and the necessary power is delegated to ensure effective performance.

Objectives of Organization

The following are the most common objectives that every organization aims to achieve.

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• To earn profit.
• To achieve growth and success.
• To achieve customer satisfaction.
• To bring innovation.
• Employee satisfaction and engagement.
• To provide value to society.

Characteristics of Organization

An organization is a structured unit of people who come together, establish an entity, and collectively work to achieve common objectives. The following are the common features of organizations.

Association of People

An organization is formed when a group of individuals with shared goals come together. By working together, they establish connections and relationships within the workplace. The success or failure of the organization depends on how well they communicate, collaborate, and trust each other.

In simpler terms, an organization is like a team of people united by a common purpose, and their ability to work harmoniously determines their overall success.

Common Goals

Organizations are formed with the intention of achieving the collective objectives shared by the people involved. These objectives can vary based on the nature of the organization, such as maximizing profits, maximizing service provision, or creating value within the organization.

In simpler terms, organizations exist to pursue common goals that align with their purpose, whether it’s making money, providing services, or adding value to their stakeholders.

Planned Structure

Organizations operate with structured systems that assign specific roles, authorities, and responsibilities to each member. This structure ensures clarity and helps differentiate the tasks and decision-making authority of every employee.

It’s like a blueprint that outlines who does what and who has the power to make certain decisions within the organization.

Coordinated Activities

Coordination is a vital function that brings together the collective efforts of all members in an organization to achieve shared goals and objectives. It creates a powerful synergy effect where the combined actions of individuals result in a greater impact than if they worked independently.

Division of Work

In organizations, complex tasks are broken down into smaller activities based on the specific skills needed for each task. This allows for job specialization, where employees can focus on the areas where they excel and have expertise.

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Employees have the freedom to choose jobs that align with their skills, abilities, and interests, while organizations can assign tasks based on an individual’s unique combination of skills, experience, and interests.

Authority and Responsibility Relationships

In organizations, there is a hierarchical structure that includes different job positions. Each position has clear responsibilities and authority levels. The top management is responsible for establishing effective authority-responsibility relationships among employees, units, and departments. They ensure that everyone knows their roles, who they report to, and who they have authority over.

Continuous in Nature

A key characteristic of organizations is their focus on continuity. In addition to pursuing specific goals, firms aim to sustain their activities indefinitely. While they may not always achieve their predetermined goals within set timeframes, organizations continuously set new objectives to maintain their momentum after reaching previous goals.

Examples of Organization

We have become part of different types of organizations in our daily life. Let’s look at some examples of organizations.

• Schools
• Banks
• Political Parties
• Hospitals
• NGOs
• INGOs
• Government Organizations
• Universities
• Colleges
• Departmental Stores
• Clubs

Types of Organization

Wherever we go we are surrounded by different types of organizational institutions. Normally, organizations can be categorized into four main types – formal, informal, profit-oriented, and service-oriented.

Formal Organization

A formal organization is a structured entity that adheres to established laws, rules, and regulations in order to achieve common goals and objectives. It operates with clear systems, defined roles, a proper balance of authority and responsibility, an effective communication system, and a healthy work environment.

These organizations intentionally follow government regulations and are officially registered. Examples of formal organizations include schools, colleges, hospitals, and government institutions. They provide a framework for organized and regulated operations, ensuring efficiency and accountability in pursuing their mission.

Informal Organization

An informal organization emerges within a formal organization without official approval or recognition. It is formed by individuals who share common interests or goals within the larger organization. These groups have specific purposes that may not always align with the formal institution, leading to potential conflicts.

Informal organizations operate based on personal relationships, shared values, and informal communication channels. For example, employees forming a social club or a group of colleagues collaborating on a project outside of formal work assignments.

Profit-Oriented Organization

A profit-oriented organization is focused on maximizing financial gain as its primary objective. These organizations are legally established and operate with the intention of generating profits through the sale of goods or services.

Examples of profit-oriented organizations include private schools, business firms, and private hospitals. Their main purpose is to generate revenue and ensure financial success by delivering products or services that customers are willing to pay for.

Service-Oriented Organization

A service-oriented organization is focused on providing services to the general public without a profit motive. These organizations are legally established with the primary goal of serving the community. Examples of service-oriented organizations include government schools, government hospitals, and various non-governmental organizations (NGOs) dedicated to providing assistance and support to those in need.

Their objective is to deliver essential services, such as education, healthcare, social welfare, and humanitarian aid, to improve the well-being and quality of life for individuals and society as a whole.

Importance of Organization

In our daily life, we have been served by different organizations and they have become important aspects of our life. Let’s understand how organizations benefit us, our society, and the nations as a whole.

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• Employment Opportunities: Organizations create job opportunities, offering people the chance to earn a living and contribute to the economy.
• Convenience: Organizations make our lives easier by providing goods and services that meet our needs and desires.
• Improved Living Standards: Organizations play a role in improving people’s lives by providing access to essential services, such as healthcare, education, and utilities.
• Resource Utilization: Organizations ensure efficient utilization of machinery and natural resources, optimizing productivity and minimizing waste.
• Creativity and Innovation: Organizations foster creativity and innovation, driving advancements in technology, products, and services.
• Coordination and Collaboration: Organizations bring people together, building formal relationships and coordinating collective efforts towards common goals.
• Economic Growth: Organizations contribute to economic growth by generating revenue, creating wealth, and stimulating economic activity.
• Government Revenue: Organizations serve as a source of government income through taxes, helping fund public services and infrastructure development.
• Social Impact: Organizations address social issues, support community development, and contribute to the overall well-being of society.
• Specialization and Expertise: Organizations allow individuals to specialize in their areas of expertise, leading to increased efficiency and quality in products and services.