A definition of organization suggested by Chester Barnard, a well known management practitioner, nearly sixty years ago still remains popular among organization and management theorists.
According to him, an organization is, “a system of consciously coordinated activities or efforts of two or more persons”. In other words, a formal organization is a cooperative system in which people gather together and formally agree to combine their efforts for a common purpose.
It is important to note that the key element in this rather simplistic definition is “conscious coordination” and it implies a degree of formal planning, division of labour, leadership and so on.
For example, if two individuals agree to push a car out of a ditch, as a onetime effort, then these individuals would not be considered as an organization. However, if these two individuals start a business of pushing cars out of ditches, then an organization would be created.
More recently, Bedeian and Zamnuto have defined organizations as “social entities that are goal directed, deliberately structured activity systems with a permeable boundary.” There are four key elements in this definition.
The word “social” as a derivative of society, basically means gathering of people as against plants, machines, buildings, even though plants, machines and buildings are necessary contributors to the existence of the organization. Organizations will cease to exist if there were no people to run them, even if other things remain.
For example, if everybody resigns from a company and no one is replaced, then it is no longer an organization even though all material assets of the company remain until disposed off. On the other hand, there are organizations such as neighborhood associations which have only people in it and without any physical assets. Accordingly, it is the people and their roles that are the building blocks of an organization.
All efforts of an organization are directed towards a common goal. A common goal or purpose gives organization members a rallying point. For example, Ross Perot, Chief Executive Officer (CEO) of Electronic Data systems (EDS), recommended when he joined General Motors, that GM should strive to become the finest car manufacturer in the world. This became the common goal of all GM employees.
While the primary goal of any commercial organization is to generate financial gains for its owners, this goal is inter-related with many other goals, including the goals of individual members.
For example, General Motors may have the commercial goal of producing and selling more cars every year, community goal of reducing air pollution created by its products and the employee goals of earning and success achievement.
By systematically dividing complex tasks into specialized jobs and categories of activities into separate departments, an organization can use its resources more efficiently. Subdivision of activities achieves efficiencies in the work place.
The organizations are deliberately structured in such a manner so as to coordinate the activities of separate groups and departments for the achievement of common purpose.
All organizations have boundaries that separate them from other organizations. These boundaries determine as to who and what is inside or outside the organization. Sometimes, these boundaries are vigorously protected.
However, the dynamics of the changing world has made these boundaries less rigid and more permeable in terms of sharing information and technology for mutual benefit. For example, IBM joined with both Motorola and Apple Computers in 1993 to bring out a new Power PC chip in the market.