Organizations are hard to see. We see
outcroppings, such as a tall building, a computer workstation, or a friendly
employee; but the whole organization is vague and abstract and may be scattered
among several locations,
even around the world. We
know organizations are there because they touch us every day. Indeed, they are so common that we take
them for granted. We hardly notice that we are born in a hospital, have our birth records registered in a
government agency, are educated
in schools and universities, are raised on food produced on corporate farms, are treated by doctors
engaged in a joint practice, buy a house built by a construction company and sold by
a real estate agency, borrow money from a bank, turn to police and fire departments when trouble erupts,
use moving companies to change
residences, receive an array of benefits from government agencies, spend 40 hours a week working in
an organization, and are even laid to rest by a
funeral home.
Definition
Organizations as diverse as a
church, a hospital, and Xerox have characteristics in common. The definition used to
describe organizations is as follows: organizations are (1) social entities that (2)
are goal-directed, (3) are designed as deliberately structured and coordinated
activity systems, and (4) are linked to the external environment.
The key element of an
organization is not a building or a set of policies and procedures; organizations are made up of
people and their relationships with one another. An organization exists when
people interact with one another to perform essential functions that help attain goals.
Recent trends in management recognize the importance of human resources,
with most new approaches designed to empower employees with greater
opportunities to learn and contribute as they work together toward common goals.
Managers deliberately structure
and coordinate organizational resources to achieve the organization’s
purpose. However, even though work may be structured into separate departments or sets
of activities, most organizations today are striving for greater horizontal
coordination of work activities, often using teams of employees from different functional areas
to work together on projects. Boundaries between departments, as well as those between
organizations, are becoming more flexible and diffuse as companies face the
need to respond to changes in the external environment more rapidly. An
organization cannot exist without interacting with customers, suppliers,
competitors, and other elements of the external environment. Today, some companies are even cooperating
with their competitors, sharing information and technology to their mutual
advantage.
Types of Organizations
Some organizations are large,
multinational corporations. Others are small, familyowned shops. Some manufacture products
such as automobiles or computers, whereas
others provide services such as legal representation, banking, or medical services.
Another important distinction is
between for-profit businesses and nonprofit organizations. There are some important dissimilarities to
keep in mind. The primary difference is that managers in businesses direct their
activities toward earning money for the company, whereas managers in nonprofits
direct their efforts toward generating some kind of social impact. The unique
characteristics and needs of nonprofit organizations created by this distinction present
unique challenges for organizational leaders.
Financial resources for
nonprofits typically come from government appropriations, grants, and donations rather than
from the sale of products or services to customers. In businesses, managers focus on
improving the organization’s products and services to increase sales
revenues. In nonprofits, however, services are typically provided to nonpaying clients, and a major
problem for many organizations is securing a steady stream of funds to
continue operating. Nonprofit managers, committed to serving clients with limited
funds, must focus on keeping organizational costs as low as possible and demonstrating a
highly efficient use of resources. Another
problem is that,
since nonprofit organizations do not have a conventional “bottom line”, managers
often struggle with the question of what constitutes organizational
effectiveness. It is
easy to measure dollars and cents, but nonprofits have to measure intangible goals such as “improve public
health” or “make a difference in the lives of the disenfranchised.”
Managers in nonprofit
organizations also deal with many diverse stakeholders and must market their services to
attract not only clients (customers) but also volunteers and donors. This can sometimes
create conflict and power struggles among organizations.
Importance of Organizations
It may seem hard to believe
today, but organizations as we know them are relatively recent in the history of
humankind. Even in the late nineteenth century there were few organizations of any size or
importance—no labor unions, no trade associations, and few large businesses,
nonprofit organizations, or governmental departments. What a change has occurred since
then! The development of large organizations transformed all of society, and,
indeed, the modern corporation may be the most significant innovation of
the past 100 years. Organizations are central to people’s lives and
exert a tremendous influence.
Organizations are all around us
and shape our lives in many ways. Organizations also produce goods and services
that customers want at competitive prices. Companies
look for innovative ways to produce and distribute desirable goods and services more efficiently.
Two ways are through e-business and through the use of computer-based manufacturing
technologies. Redesigning organizational structures and management practices can also
contribute to increased efficiency. Organizations create a drive for innovation rather
than a reliance on standard products and outmoded ways of doing things. Organizations
adapt to and influence a rapidly changing environment.
Through all of these activities,
organizations create value for their owners, customers, and employees. Managers analyze which parts of
the operation create value and which
parts do not; a company can be profitable only when the value it creates is greater than the cost of
resources. Finally,
organizations have to cope with and accommodate today’s challenges of
workforce diversity and growing concerns over ethics and social responsibility,
as well as find effective ways to motivate employees to work together to accomplish
organizational goals. Organizations
shape our lives, and well-informed managers can shape organizations. An understanding of organization
theory enables managers to design organizations to function more effectively.
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