What is an organization?

You probably have some idea what an organization is, and can think of some examples; but can you define an organization? Here are some tasks to help you.

The sort of answers you might have given

The list might also include large commercial companies (local, national, multinational), government departments, churches or other religious institutions, universities, colleges, labour units, football teams, social clubs, orchestras, and charities.

But you may have had more difficulty in dealing with the second task.

You may well have hesitated when you tried to list what these all have in common. Some of them are what might be termed ‘formal’ organizations with legal charters, definite structures, recognizable characteristics and locations. Others are far less formal, with little or no existence other than through the activities of members.

This difficulty has long been an issue in the study of organizations, and many theorists have argued that it is easier to describe specific organizations than it is to offer a single definition. Peter Drucker, one of the key management thinkers of the postwar period, has argued that we now live in a ‘society of organizations’. But in several of his key works he avoids the issue of defining the term ‘organization’.

Chester Barnard, an early writer on management, did offer a definition of a formal organization in his work on ‘Functions of the Executive’ (1938). He defined a formal organization as a ‘system of consciously coordinated activities of two or more persons’. This is a very wide-reaching definition and would include two people planning to visit somewhere together, as well as the United Nations or the World Health Organization.

We can expand on this slightly to offer a minimal definition of an organization as something that requires at least two people, who acknowledge each other as members, and have at least one shared objective or common purpose, deliberately working together to attain that objective.

A quick search on the Internet produces the following variations.

In order for an organization to exist over any significant period of time – from a few months to many decades – it will also need some resources drawn from its environment. Small organizations may need no more than the time and effort of its members. Larger ones will need a range of resources, particularly financial and material ones. One way to visualize this is to think of an organization as a system – which at the very simplest level can be depicted as a system, with a boundary, an input and an output (and feedback).

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The inputs can include time, skills, effort, raw materials, finance, components.

The outputs can include products, services, increased skills, profits, achievement of the primary objective.

Let’s think of one of the simplest possibilities; my friend and I decide to go on a walking tour for our vacation. We meet a few times to consider possible places to go, and we eventually agree on a location and a date on which we will start on our tour. We make all the arrangements for travel, accommodation and so on. We start our walk and complete our tour. For the time from which we first decided to go on our tour, to the time when we completed it, we could be considered to be an organization: But a very small and an informal one. If we no longer saw each other afterwards – perhaps we had some major disagreement during the vacation – then our particular organization would simply cease to exist.

Now consider if, after we had completed our tour, we decided that we could book similar tours for our friends so that they would not have to do all the arranging themselves – and they would pay us a small commission for doing this. After a few months we find that we are spending all our time on these activities, not just for our friends but also for others who have heard about our service. In fact we have to employ three other people, and rent a small office, and we can only do this after we have been to a bank to arrange credit to make the down payments and pay the first few months’ wages of our new colleagues. After a further period we start to book other sorts of tour – cycling, climbing, sports holidays and many other types. By this time we have become not only a larger organization, but a more complex and formal one.

In fact some other important changes have happened with our organization. We are now using far more resources, including

We also have more established links with our environment. For instance we may negotiate favourable terms with hotels or travel agencies for our bookings. We may set up an agreement with an insurance company to cover our bookings and our employees. We will want to ensure that we have relevant sources of information so that we can make and confirm our bookings, contact potential customers and suppliers, and so on.

We have also become more formal and have a structure of some sort

Our organization will now have to become a legal entity, which in most countries will mean that it has to be registered and be accountable in some sense. It is also operating as part of an environment which will include customers, suppliers and competitors. This means the organization is dependent on its environment; the economy and market, competitors, government and legal factors, and other external factors and forces. A very large organization will be able to influence its environment to an extent, while smaller organizations will have to adapt to environmental factors if they are to survive. Microsoft and Sony can exert enormous pressure on their environment: our small travel company cannot.