BUS101: Introduction to Business

Organization helps businesses achieve focus and success in reaching their goals.

Learning Objectives

• Explain the role of specialization, delegation, efficiency and departmentalization in effective organization.
• Recognize the benefits of effective organization

Key Points

• Organization is the composition of individuals and groups directed towards coordinated goals.
• Division of labor is the assigning of responsibility for each organizational component to specific workers or group of workers.
• Specialization is division of labor with the added stipulation that the responsibility for a specific task lies with a designated expert in that field.
• Good organization structure is essential for expanding business activity. Organization structure determines the input resources needed for the expansion of a business activity.

Terms

• efficiency

  The extent to which time is well used for the intended task.

• resource

  Something that one uses to achieve an objective. An examples of a resource could be a raw material or an employee.

Example

• Functional authority is where managers have formal power over a specific subset of activities. For instance, the Production Manager may have the line authority to decide whether and when a new machine is needed but the Controller demands that a Capital Expenditure Proposal is submitted first, showing that the investment will have a yield of at least x%; or, a legal department may have functional authority to interfere in any activity that could have legal consequences. This authority would not be functional but it would rather be staff authority if such interference is "advice" rather than "order".

Organization and Goal Orientation

Organizations have their own purposes and objectives. An organization employs the function of organizing to achieve its overall goals. It can serve to harmonize the individual goals of the employees with the overall objectives of the firm. Individuals form a group, and the groups form an organization. Organization, therefore, is the composition of individuals and groups. Individuals are grouped into departments, and their work is coordinated and directed towards organizational goals. Effective organization allows a firm to achieve continuity, effective management, and growth and diversification, and optimize the use of resources and provide proper treatment to employees.

Specialization and Division of Work

The philosophy of organization is centered on the concepts of specialization and division of work. Division of work refers to assigning responsibility for each organizational component to a specific individual or group. Specialization occurs when the responsibility for a specific task lies with a designated expert in that field. Certain operatives occupy positions of management at various points in the process to ensure coordination.

Efficiency

To make optimum use of resources such as labor, material, money, machine, and method, it is necessary to design an organization properly. Work should be divided and specific people should be given specific jobs to reduce the wastage of resources in an organization. In other words, effective organization promotes a high level of efficiency.

Delegation

Delegation is the process managers use to transfer authority and responsibility to positions below them. Today, organizations tend to encourage delegation from the highest to lowest possible levels. Delegation can improve an organizations flexibility to meet customers' needs and help organizations adapt to competitive environments.

Departmentalization

Departmentalization is the basis on which individuals are grouped into departments, and departments into total organizations. Departmentalization allows organizations to simultaneously work on various projects and tasks. Approach options include:

• Functional - by common skills and work tasks
• Divisional - common product, program, or geographical location
• Matrix - combination of functional and divisional
• Team - to accomplish specific tasks
• Network - departments are independent, providing functions for a central core breaker

Organization
Any organization -- in this case, a professional society -- employs the function of organizing to achieve its overall goals.