- Organizations are established to attain certain objectives. A business enterprise must determine if it wants to publish books, produce textiles or provide transportation services. It is useful to classify overall objectives into immediate, short-term and long-term objectives.
- The first step toward organizing a group endeavor is to divide the task into fundamental activities. For example, an industrial enterprise should have these major functions: production, financing, purchasing, sales and personnel.
- The next step is to classify activities according to similarities, purposes, functions and considering human and physical resource requirements. For each class of activity, a department (and sub-class section in the department) may be assigned. For example, various activities related to production can be grouped and classified as production department activities.
- After ascertaining various activities, the next step is to assign them to a group of qualified individuals to carry them out. Each team member will receive a meaningful portion of the job and be responsible for it. There should be unity of direction; i.e., all activities should be directed toward the same end.
- Assigning responsibility for an activity requires giving concomitant authority for carrying it out. The organizational structure comprises of different positions that form a hierarchy based on authority and responsibility relations. It is important to delineate authority and responsibility lines so that no room for confusion and overlap remains, but leaving some leeway to subordinates helps preserve flexibility in the face of contingencies.
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