In this page we consider in detail the following questions:

What is an organisation?

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.
  • Organisation can also refer to a process, i.e. structuring and arranging the activities of the enterprise or institution to achieve the stated objectives.

There are many types of organisations, which are set up to serve a number of different purposes and to meet a variety of needs, including companies, clubs, schools, hospitals, charities, political parties, governments and the armed forces.

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.

  Illustration - Football team

A football team can be described as an organisation because:

  • It has a number of players who have get 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.

Why do we need organisations?

Organisations exist primarily because they are more efficient at fulfilling needs than individuals who attempt to cater for all their requirements in isolation and without assistance from others.

The main reason for this is the ability that organisations have of being able to employ the techniques of specialisation and the division of labour.

  • Specialisation is perhaps the oldest organisational device. It occurs when organisations or individual workers concentrate on a limited type of activity. This allows them to build up a greater level of skill and knowledge than they would if they attempted to be good at everything. The advantage of arranging work in this way lies in the fact that, by concentrating on one type or aspect of work, it is possible to become much more efficient. By concentrating its expertise into a limited range of activities, the organisation plans and arranges its output to achieve the most efficient use of its resources. A key aspect of specialisation involves the division of labour.
  • The division of labour developed as industrialisation advanced, and larger organisations became more popular. It was first used in car production at Ford and is associated with the work of Taylor, which we will be discussing later. The car production process was broken down into many separate tasks and each worker was required to specialise in only one small aspect of the total process. This benefits the manufacturer in three ways:
    • Simple tasks encourage the use of highly specific equipment, e.g. power wrenches that speed up the manufacturing operation.
    • Semi-skilled labour can be employed rather than highly skilled operatives.
    • Workers are only responsible for one process and so are able to develop a high level of expertise and increase their output per period.

Modern industrialised economies make great use of specialisation and the division of labour, but for organisations to gain the full benefits of these techniques they also employ another organisational device known as hierarchy. For further details look at the topics of authority, responsibility and accountability within the organisation.

As the organisation grows it will reach a size where goals, structures and control procedures need to be formalised to ensure that objectives are achieved.

Different types of organisations

Organisations can be classified in many different ways, including the following:

Profit seeking v not for profit

Profit seeking organisations

Some organisations, such as companies and partnerships, see their main objective as maximising the wealth of their owners. Such organisations are often referred to as 'profit seeking'.

The objective of wealth maximisation is usually expanded into three primary objectives:

  • to continue in existence (survival)
  • to maintain growth and development
  • to make a profit.

 Not-for-profit organisations (NFPs)

Other organisations do not see profitability as their main objective. Such not-for-profit organisations ('NFPs or NPOs') are unlikely to have financial objectives as primary.

Instead they are seeking to satisfy particular needs of their members or the sectors of society that they have been set up to benefit.

Public sector v private sector

Public sector organisations

The public sector is that part of the economy that is concerned with providing basic government services and is thus controlled by government organisations.

 The composition of the public sector varies by country, but in most countries the public sector includes such services as:

  • police
  • military
  • public roads
  • public transit
  • primary education and
  • healthcare for the poor.

 Private sector organisations

The private sector, comprising non-government organisations, is that part of a nation's economy that is not controlled by the government.

  This sector thus includes:

  • businesses
  • charities and
  • clubs.

Within these will be profit-seeking and not-for-profit organisations.


A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.

(The International Co-operative Alliance Statement on the Co-operative Identity, Manchester 1995)

Co-operatives are thus businesses with the following characteristics:

  • They are owned and democratically controlled by their members - the people who buy their goods or use their services. They are not owned by investors.
  • Co-operatives are organised solely to meet the needs of the member-owners, not to accumulate capital for investors.

  For example, a retail co-operative could comprise a group of people who join together to increase their buying power to qualify for discounts from retailers when purchasing food.

Note: Co-operatives are similar to mutual organisations in the sense that the organisations are also owned by the members/clients that they exist for. However, they tend to deal in primarily tangible goods and services such as agricultural commodities or utilities rather than intangible products such as financial services.

Further areas of interest

Further topics relating to organisations can be found by clicking below:

Created at 6/19/2012 3:22 PM  by System Account  (GMT) Greenwich Mean Time : Dublin, Edinburgh, Lisbon, London
Last modified at 9/24/2013 4:03 PM  by System Account  (GMT) Greenwich Mean Time : Dublin, Edinburgh, Lisbon, London

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