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An organisation can be defined as:
“A social arrangement which pursues collective goals, which controls its own performance, and which is a boundary separating it from its environment.”
This is, perhaps, a deceptively simple definition. Probably the most important word is ‘social’. Organisations consist of people and we are all social animals. We have to get on with our colleagues; ideally we would like our boss, or at least respect our boss. We have to get on with customers; we have our own ambitions; we have our own motivations.
Early management theory tended to neglect the social side of organisations and management and had a rather cold, militaristic approach. Modern theories have changed this considerably.
Another important aspect of the definition is that of ‘collective goal’s. There has to be an assumption that people within an organisation are ultimately aiming at the same end results, if they are not, then chaos is likely to rule. One of the functions of management is to arrange the business and the people in it so that everyone is pulling in the same direction, and the collective goals are ultimately established.
Types of organisations
You need to be aware of the characteristics of several types of organisation.
Commercial organisations are profit-seeking. They can be sole traders, partnerships,
limited liability partnerships and limited companies. The main advantage of limited
liability partnerships and limited companies is that if the organisation hits hard times
and has to go to liquidation, the owners of the organisation are protected. Creditors
and banks can pursue only the assets which are in the company. Sole traders and
partners, on the other hand, have unlimited liability for all the business’s debts.
The second type of organisation is a not-for-profit organisation. An example of a notfor-
profit organisation could be a charity, such as a charitable hospital. Instead of
producing a profit and loss account, they tend to produce income and expenditure
accounts. Ultimately their income has to exceed their expenditure or they will run out
Public sector organisations are owned by the state either at a national level or at a
local level. Examples could be the defence department, many health services and
educational systems. In some economies other industries or businesses are also
owned by the state. For example, many national airlines are state-owned.
Non-governmental organisations tend to be not-for-profit organisations but with an
international brief. Many United Nations organisations will fall into this category.
Co-operatives are owned by the people who work in the organisation. Some farmers,
for example, set up co-operatives to market their products more effectively than they
could on their own. Usually they seek some sort of profit, but the ownership is shared
widely amongst the people who are working in the organisation.