Overview of an Organization

Prepared by: Mary Ann M. Alminaza

What is an organization?

Derived from a Greek word organon/ ergon which means work; deed

An organization is a collection of people working together to achieve a common purpose.(R.

Medina)

Importance of an Organization

Economic Growth - It increases creation of new products/better and diverse services per
head/person. Organizations produce products and provide services for the growth of the
economy.
Social Development - It has a great effect and contribution to the society in general (Creation of
opportunity such as jobs, work, acknowledging and providing the needs of human resource etc.)
Environment Protection/Preservation- It serves as a means for the improvement of life and the
world we live in. (Improvement of the standards of living and the quality of life)

Different Functions of an Organization

Operations
o Responsible for managing the creation of goods and services for the customers.
It plans, coordinates, organize the resources needed to produce the products and create
services
o Transform inputs to outputs, from procurement to finish products
Marketing
o It helps identify and source potentially successful products for the marketplace and
promote them by differentiating them from other similar products.
o It oversees, advertising, promotion, distribution for sale, customer relations
R&D (Research and Development)
o It involves the utilization of the information provided by the marketing group which will
result to product development and processes improvement as well as development of
new products and services
o It contributes to the sustainability of the business
Finance
o Manages the financial or monetary aspect of the organization
o It includes the planning, budgeting, recording and reporting of activities that deals with
money.

Human Resource
 o Manages the people who worked with the organization. It deals from manpower
planning, placement, remuneration, development, retention until the separation of the
people who worked with the organization.
MIS/IT (Management Information System/ Information Technology
o Deals with the collection, storage and retrieval of relevant information
o In the advent of computer, management of information has been less complicated
because access to any information is readily available.

Characteristics of an Organization

Distinct Purpose (Common Goal or Purpose)

o It gives meaning for the existence of the organization
o Usually express as goals or objectives
People (Coordination of Effort)
o An organization is usually compose of two or more people who perform the work
together interactively, harmoniously and with proper coordination of effort.
Deliberate Structure
o In order to maintain the harmonious relationship, good work interactions and effective
communication, the organization should have a clear and precise structure wherein the
following should be clearly depicted.
Hierarchy of Authority
Positions are established and linked through chain of command in order
to control the behavior of the employees.
It is top to bottom approach
Division of labor
The total work is sub-divided into manageable parts
It is usually in a horizontal approach

Organizational Structure

- Is a system that consists of explicit and implicit institutional rules and policies designed to outline
how various work roles and responsibilities are delegated, controlled and coordinated.

- Organizational structure also determines how information flows from level to level within the
company.

Organizational Chart is a graphic or visual representation of the structure of the organization.

It usually shows how authority, responsibility and accountability, as well as communications flow
within the organization. It also depicts the different management functions and its sub-divisions.
(Decision-making travels downward and answerability travels upward)

Types of Organizational Charts

o Hierarchical or Vertical or Traditional

This type of organizational chart was first adopted by military which clearly
shows the chain of command. All decision must always come from the top and
most of the departments are grouped according to the organizations function.

Advantages:

Clearly defines level of authority and responsibility

Clearly show if who each person reports to who
Motivates each employee with clear career paths and chances of
promotion
Gives each employee a specialty
Develops camaraderie with each employee within the same department
Disadvantages:

Can slow down innovation or important changes due to increase in

bureaucracy
Slows down communication and decision making
Will cause the employee to act in the interest of the department instead
of the organization
Will make employees feel undervalued especially those who belong to
the lower level
o Horizontal or Flat

It is used by newly formed companies where there are few levels between upper
level management and the staff level-employees. It encourages less supervision
and more involvement of the employees.

Advantages:
 Gives employees more responsibility
Foster open communication and improves decision making
Can easily adjust to changes
Improves coordination and speed up implementation of new ideas
Create more specialized and expert employees
Disadvantages:

Can create confusion since employees do not have a clear supervisor to

report to
Loss of experienced managers
Difficult to maintain once the organization expands or grow bigger
Tends to allow more staff control over business matters
o Matrix

Ideally matrix organization attempts to integrate both the horizontal and vertical
structures because the organization wants to maintain its specific lines of
functions intact and bring together specialized skills from vertical structure. The
employees have vertical lines of accountability to the immediate line-of-business
superiors and horizontal accountability to ones project teammates.

Advantages:

Allows managers to choose individuals by the needs of a project

Gives more dynamic view of the organization
Encourages employees to use their skills in various capacities aside from
their original roles
Disadvantages:

Creates conflict between the project manager and department manager

Change more frequently than the other organizational chart

Stakeholders of the Organization

- Anyone or entity that is affected or can affect the organization or who has an interest or concern
with the organization. Thus it can be internal or external.

Kinds of Stakeholders

External
o Suppliers - They provide the necessary goods and services for organizations to complete
their tasks and goals. Organization in return must pay its supplier a pay price and
encourage a good business relations with them.
 o Customers - They are affected by the goods and services provided by the business, and
the business cannot survive without providing quality goods or services to customers
because customers provide the money that allows the organization to pay its obligations.
o Community Business cannot function outside of a society, which is the set of
institutions that facilitate useful social interactions including the establishment of
markets where businesses can offer their goods and services. Organization in return can
provide job employment or fulfilling their other social and moral obligations with the
community.
o Government - it rely on business for tax revenue to support public policies and projects.
Businesses rely on governments to provide infrastructure as well as political, social, and
legal stability that provide a stable and predictable environment in which to conduct
business. It serves as the regulatory body of the business.
o Environment It refers to the natural environment or the nature where the business
was established. In return the organization should protect and preserve the environment
and create ways on how to lessen the pollution (noise, air, water and land)
o Union It can make or break the organization depending on the relationship that the
union and the top level management has established.
Internal
o Shareholders/Owners The most obvious among the stakeholders, they are the one
who invest their hard-earned money to gain a good profit in return.
o Employees - They can make or break the business, and the employees rely upon the
organizations for their livelihood in the form of wage or salary. Organizations sometimes
contribute to the personal and professional development or self-fulfillment of an
employee.

Different Types of Organization

Organizations can be categorized according to:

Ownership
o Privately owned companies or businesses
o Public or government owned and controlled business or organization
A government-owned corporation is a legal entity that undertakes commercial
activities on behalf of an owner government.
Motive
o Profit
o Non-profit
Legal Structure
o Sole Proprietorship is also referred to as single proprietorship, a simple form of
business and the easiest to register.
It is registered through the Bureau of Trade Regulation and Consumer Protection
of the Department of Trade and Industry (DTI).
It is owned by an individual who has full control/authority of its own.
Owns all the assets, personally answers all liabilities or losses
It has an unlimited liability
o Partnership consists of two or more people who bind themselves to contribute money
or industry to a common fund, with the intention of dividing the profits among
themselves. It is registered under the Securities and Exchange Commission (SEC) and it is
a juridical entity which usually dissolved upon the death of a partner or whenever a
partner bolts out.
General - every partner has unlimited liability for the debts and obligations of
the business, including taxes
Limited - is a business partnership where at least one owner is a general partner
and at least one owner is a limited partner. This means that the general partner
bears the unlimited liability while the limited partner has the liability only up to
the amount of their capital contributions.
o Corporation is an artificial being created by operation of law, having the right of
succession and the powers, attributes and properties expressly authorized by law or
incident to its existence. It is compose of at least five (5) natural person (up to maximum
of 15) and it shall exist for a period of not more than fifty (50) years from the date of its
incorporation unless dissolved or extended. Just like partnership, it is also registered
under the SEC.
o It may be stock or non-stock corporations. Corporators are technically those who
compose the corporation in a stock corporations who are called shareholder or
stockholders while for non-stock corporations, they are called members.
o Incorporators are those stockholders or members mentioned in the articles of
incorporation as originally forming and composing the corporation and whose
signature appears in the articles of incorporation.
o Liability of the shareholders is limited to the amount of their capital
contribution.
o It is more difficult to create, organize and manage.
o Cooperative it is composed primarily of small producers and consumers with a
common bond of interest, who voluntarily join together to form business enterprises
which they themselves own, control and patronize. There must be at least fifteen (15)
members who shall compose the cooperative. It is registered under the Cooperative
Development Authority (CDA)