Why does an organisation exist?
One person alone cannot do everything well. An organisation is a group of people who work together to reach a goal that is too big for one person.
- A baker, a driver and a seller together can serve a whole town.
- People can do the job they are best at (this is called specialisation).
- Together they can raise more money and take more risk.
Organisations also serve society: they give jobs, make things we need and pay taxes.
Types of organisations and ways to classify them
We can sort organisations in different ways.
By goal
- Profit organisations (shops, factories): they want to earn money for owners.
- Non-profit organisations (charities, clubs): they serve a cause and keep no profit for owners.
- Government organisations (public schools, municipal offices): they give public services.
By size
Small (a few people), medium and large (thousands of people).
By sector
Farming, making things (industry) and services (banks, transport, teaching).
By owner
Private, public (government owned) or mixed.
From one person to a legal entity
The legal form tells the law who owns the business and who must pay its debts.
- Sole owner: one person. Business and owner are one. Unlimited liability: private property can be used to pay debts.
- Partnership: two or more people share work, profit and risk. Unlimited liability for partners.
- Company: a legal entity, a separate person in the eyes of the law. It can own things, sign contracts and be sued. The owners are shareholders and have limited liability: they lose only the money they invested.
- Co-operative: many members own it together. One member = one vote. Limited liability.
Why limited liability matters: people dare to invest if their home is safe.
Organisation structures
The structure shows who reports to whom. A drawing of it is an organisation chart.
- Tall structure: many levels, few people under each boss (small span of control). Clear control, slow messages.
- Flat structure: few levels, many people under each boss. Fast and close, but the boss is busy.
- Department (functional) structure: people are grouped by job, for example sales, production, finance. Experts work together, but departments may not talk enough.
Span of control = number of people one boss manages directly. Chain of command = the line of orders from top to bottom. Delegation = giving a task and the power to do it to someone below.
Management tasks and personnel
Managers keep the organisation moving. They do four tasks again and again:
- Plan: decide goals and how to reach them.
- Organise: give people jobs, tools and money.
- Lead: guide and motivate people.
- Control: compare results with the plan and correct the gap.
The personnel (staff) are the people who work in the organisation. Good managers hire the right people, train them and treat them fairly.
Leadership styles
A leadership style is the way a leader makes decisions and treats people.
- Boss-led (autocratic): the leader decides alone. Quick, good in emergencies, but people may feel unheard.
- Team-led (democratic): the leader listens, the team shares ideas, then they decide together. Slower, but people feel proud and responsible.
- Free hand (laissez-faire): the leader gives goals and lets people choose how. Good for skilled people, risky for beginners.
No style is best always. A good leader changes style to fit the people and the situation.
Organisation theories: past and present, market share and true price
Past ideas: around 1900, scientific management said "find the one best way, train workers, pay for output". Bureaucracy stressed clear rules and levels. Later, the human relations view said that happy, respected workers work better.
Present ideas: modern firms use flatter teams, projects, remote work and give workers more say. The best structure depends on the situation (this is the contingency idea).
Market share = (the firm's sales ÷ total sales of all firms in the market) × 100%. It shows how big the firm is against others.
True price = the shop price plus the hidden costs to people and nature (for example pollution) that nobody paid yet.
Key formulas and definitions
- Organisation = people + a shared goal + a structure
- Four management tasks: Plan → Organise → Lead → Control (P-O-L-C)
- Span of control = number of people directly under one manager
- Market share (%) = firm sales ÷ total market sales × 100
- Limited liability: owner loses at most the money invested; unlimited liability: private property is also at risk
Worked examples
1. Asha has a tailoring shop alone and a customer sues for ₹3 lakh. Her shop has ₹1 lakh. What can happen, and what could she change?
As a sole owner she has unlimited liability. After the shop money is used, ₹2 lakh more can be taken from her private property. If she formed a company, the company (not Asha) would owe the debt and she would lose only what she invested.
2. A firm has 1 manager over 3 supervisors, and each supervisor has 6 workers. Draw the type and count the span of control at each level.
Levels: manager, supervisors, workers (3 levels). Manager span = 3. Each supervisor span = 6. Total workers = 3 × 6 = 18. With 3 levels and small spans, it is fairly tall.
3. A new cook has just joined a kitchen. The head chef shouts every step. Another day, an expert cook is told only "make dinner for 50". Name the styles and say if they fit.
Day 1: boss-led (autocratic). It fits a beginner who needs clear steps. Day 2: free hand (laissez-faire). It fits an expert who knows how to cook. The right style depends on the person.
4. In a town, shop X sells ₹30 lakh a year. All shops in the market together sell ₹200 lakh. Find the market share of X.
Market share = 30 ÷ 200 × 100 = 15%.
Common mistakes
- Saying "company" and "firm" mean the same. A firm is any business. A company is one legal form with limited liability.
- Thinking a flat structure has no boss. It has a boss; only the number of levels is small and the span is wide.
- Mixing up "organise" (arrange jobs and tools) with "lead" (guide and motivate people).
- Believing one leadership style is best for everyone. The best style depends on the people and the task.