What is organization?

Despite the great number of organizations, the term organization is

elusive and somewhat difficult to define. This difficulty is pointed up by

the fact that a variety of definitions have been suggested by sociologists,

psychologists, and organization and management theorists. Chester I.

Barnard’s definition, though put forth many decades ago, still remains

popular among organization and management theorists. Barnard de-

fined an organization as “a system of consciously coordinated activities

or forces of two or more persons”. In other words, when people gather

together and formally agree to combine their efforts for a common pur-

pose, an organization is the result.

Although Barnard’s statement is a good general definition, it is nec-

essary to go a step farther and identify some important common de-

nominators of organizations. According to Edgar Schein, a prominent

organizational psychologist, there are four characteristics common to

all organizations: 1) coordination of effort 2) common goal or purpose

3) division of labor 4) hierarchy of authority.

As the old saying goes, “Two heads are better than one.” When in-

dividuals join together and coordinate their mental and/or physical ef-

forts, great and exciting things can be accomplished. Coordination of

efforts multiplies individual contributions.

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Coordination of effort cannot take place unless those who have joined

together agree to strive for something of mutual interest. A common goal

or purpose gives organization members a rallying point. For example,

Nucor, a small but highly successful steel company, prints the name of

every Nucor employee on the front and back pages of its annual report.

By systematically dividing complex tasks into specialized jobs, an or-

ganization can efficiently use its human resources. Division of labour

permits each organization member to become more proficient by re-

peatedly doing the same specialized task. The advantages of dividing la-

bor have been known for a long time. One of its early proponents was the

pioneering economist Adam Smith.

According to traditional organization theory, if anything is to be ac-

complished through formal collective effort, someone should be given

the authority to see that the intended goals are carried out effectively and

efficiently. Organization theorists have defined authority as the right to

direct the actions of others. Without a recognized hierarchy of authority,

coordination of effort is difficult, if not impossible, to achieve.

All four of the four characteristics are necessary before an organi-

zation can be said to exist. Through the years, many well-intentioned

attempts to create organizations have failed because something was

missing. For example, in 1896 Frederick Strauss, a boyhood friend of

Henry Ford, helped Ford set up a machine shop, supposedly to produce

gasoline-powered engines. But while Strauss was busy carrying out his

end of the bargain by machining needed parts, Ford was secretly build-

ing a horseless carriage in a workshop behind his house. Their organiza-

tion never got off the ground. Although Henry Ford eventually went on

to become an automobile-industry giant, his first attempt at organiza-

tion failed because not all of the pieces of an organization were in place.

Ford’s and his partner’s efforts were not coordinated: they worked at

cross-purposes, their labor was vaguely divided, and they had organiza-

tional intentions, but not an organization.

Text 2

Read the following text and answer the questions that follow it.