Chapter 1

The business organisation

Chapter learning objectives

Upon completion of this chapter you will be able to:

§ define the term organisation

§ explain the need for a formal organisation

§ distinguish between different types of organisation

§ summarise the main areas of responsibility for different functions within an organisation

§ explain how different departments co-ordinate their activities

§ explain the nature and process of strategic planning

§ explain the purpose of each level of organizational management.

1 The nature of organisations

1.1 What is an organisation?

‘Organisations are social arrangements for the controlled performance of collective goals.’ (Buchanan and Huczynski)

The key aspects of this definition are as follows:

§ collective goals

§ social arrangements

§ controlled performance.

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As yet there is no widely accepted definition of an organisation. This is because the term can be used broadly in two ways:

§ It can refer to a group or institution arranged for efficient work. To organise implies that there is an arrangement of parts or elements that produces more than a random collection.

§ Organisation can also refer to a process, i.e. structuring and arranging the activities of the enterprise or institution to achieve the stated objectives. The very work organisation implies that there is order or structure.

There are many types of organisations, which are set up to serve a number of different purpose and to meet a variety of needs. They include:

§ service companies

§ factories

§ retail companies

§ political parties

§ charities

§ local councils

§ the army, navy and air force

§ schools.

What they all have in common in summarised in the definition given by Buchanan and Huczynski:

‘Organisations are social arrangements for the controlled performance of collective goals.’

(a) ‘Collective goals’ – organisations are defined primarily by their goals. A school has the main goal of educating pupils and will be organised differently from a company where the main objective is to make profits.

(b) ‘Social arrangements’ – someone working on his own does not constitute an organisation. Organisations have structure to enable people to work together towards the common goals. Larger organisations tend to have more formal structures in place but even small organisations will divide up responsibilities between the people concerned.

(c) ‘Controlled performance’ – organisations have systems and procedures to ensure that goals are achieved. These could vary from ad-hoc informal reviews to complex weekly targets and performance review.

For example, a football team can be described as an organisation because:

§ It has a number of players who have come together to play a game.

§ The team has an objective (to score more goals than its opponent).

§ To do their job properly, the members have to maintain an internal system of control to get the team to work together. In training they work out tactics so that in play they can rely on the ball being passed to those who can score goals.

§ Each member of the team is part of the organisational structure and is skilled in a different task; the goalkeeper has more experience in stopping goals being scored than those in the forward line of the team.

§ In addition, there must be team spirit, so that everyone works together. Players are encouraged to do their best, both on and off the field.

Test your understanding 1

Which of the following would be considered to be an organisation?

(i) A sole trader

(ii) A tennis club

(iii) A hospital

A) (i), (ii) and (iii)

B) (i) and (ii) only

C) (ii) and (iii) only

D) (i) and (iii) only