Unit 1: The Nature of Organization

Concept:
Basically, an organization in its simplest form (and not necessarily a legal entity, e.g., corporation or LLC) is
a person or group of people intentionally organized to accomplish an overall, common goal or set of goals.
Business organizations can range in size from one person to tens of thousands.
There are several important aspects to consider about the goal of the business organization. These features
are explicit (deliberate and recognized) or implicit (operating unrecognized, "behind the scenes"). Ideally,
these features are carefully considered and established, usually during the strategic planning process. (Later,
we'll consider dimensions and concepts that are common to organizations.) It is harmonious interrelation of
functions and staff
Haney- organisation is a harmonious adjustment of specialised parts for the accomplishment of some common purpose
or purposes.

According to keith Davis, "Organisation may be defined as a group of individuals, large or small, that is
cooperating under the direction of executive leadership in accomplishment of certain common object."
According to Chester I. Barnard, "Organisation is a system of co-operative activities of two or more persons."
TYPES OF ORGANIZATIONS
BUSINESS ORGANIZATIONS-Business organizations are economic entities established for the purpose of
making economic gains.They are of avaricious types, Surya Nepal Company,Everest Brewer company, Bottlers
Nepal,Standard Chartered Bank,Udaypur Cement Factory,Buddha Airways,Hotel Himalaya are examples of
business organization.Although Their nature is different,their purpose is to make profit to survive and grow.The
prime beneficiaries of business organizations are their owners or shareholders.
NONPROFIT SOCIAL ORGANIZATIONS-Many organizations are formed not for profit making but for providing
services to the clients of the community.For examples,Tribhuvan University,Bir Hospital,Family Planning
Association of Nepal, And CRS Company are nonprofit service organizations.They provide specific services to
some segment of the society Such organizations run on small fees,donations,grants,endowments, and the like.The
prime beneficiaries of nonprofit services organizations are the clients and the communities.
MUTUAL-BENEFIT

ORGANIZATIONS-The

examples

of

mutual-benefits

organizations

are

labour

unions,trade,associations,teachers associations,chambers of commerce,community clubs and the like .Individuals

join these organizations to satisfy their needs for affiliation,associations and security.Membership is , therefore,
the strength of these organizations.These organizations are compels to mange.membership dissatisfaction is the
biggest threat to these organizations.It members needs are not full filed,they quit their membership.These
organizations are also conflict-prone.Therefore, the failure rate is higher in these organization.The prime
beneficiaries of mutual-benefit organization are the members.
COMMONWEAL ORGANIZATIONS-Common organizations are basically services organizations.They are created

to provide standard.Services to large segment of the population.There is no profit motive behind the formation of
these organizations .The common of weal of the organization are postal services,police departments,army units,
and other public agencies.The prime beneficiaries of commonweal organization are the general public
Organizational Goals:
A goal is a statement of a desired future an organization wishes to achieve. It describes what the organization is trying accomplish. Goals
may be strategic (making broad statements of where the organization wishes to be at some future point) or tactical (defining specific shortterm results for units within the organization).
Goals serve as an internal source of motivation and commitment and provide a guide to action as well as a means of measuring
performance Defining organizational goals helps to conceptualize and articulate the future direction of the organization, thus allowing those
responsible for setting that direction to develop a common understanding of where the organization is heading. Goals provide a way of
assuring

that an organization will get where it wants to go.

Characteristics of Goals:
i) Time frame: Every organization should have specific time to achieve goals. The organization goals are
determined under a specific time period. If we are going to earn 20% profit in coming 6 years so that is the time
frame. Goals are determined neither for yesterday nor for today but for future. The specific time perod which the
organization want to achieve the target point. So the time frame is the important characteristics of goals.
ii) Multiple and Various: There are different types of goals to different organization. The business organization has
different goals like to earn profit. The organization has not only one goals but they have multiple goals. For
example: the bank is established to earn profit generally but in broader sense they have many goals like as they
have a target to open a branch within two years, to provide effective service to the costumer etc. Therefore the
goals may be in different numbers. The organization want to increase productivity, to fulfill the responsibilities to
the different societies.
iii) Hierarchy: Goals have determined in different time period. The goals may determined for 1 month to 20 years
also. The goals is hierarchy. There are different types of goals such as long term goal, it determines by top level
of management, Mid term goal is determined by middle level of management and short term goal.
iv) Goals from network: the organization goals have many hierarchy. The organizational goals can make a
network. The network is made by different level and structure. Such as: high level, middle level and lower level.
v) Goals may conflicts: the organization goals may go in different direction, that is called conflicts. For example:
The organization can have a goal to increase productivity but want to reduce cost, so in this case the goals can
be gone in opposite direction,so the goals may conflicts.
Problem of Goal formulation process
In the process of goal formulation there are many conflicts are taken place. While determining goal which we have
to face as barriers that is known as problems of goal formation.
i) Inappropriate goal: Sometimes the manager don't formulate goal appropriate for the organization. For example
the manager formulate the goal achieve the 5 times more profit that may not be appropriate goal. So this is the
problems of goal formulation. If the goal is does not match to the maximum ability of organization that is called
inappropriate.
ii) Improper reward: sometimes while formulating goal the manager may not given the reward to the owner,

stakeholder and efficient labour and employee. It is the improper reward. Therefore improper reward is one of the
problems of goal formulation. Sometimes a efficient employee may not get higher reward that is said to be
improper reward.
iii) Reluctance to goal: While formulating goal sometimes the managers has lack of confidence or afraid of goal
formulation. So it can be the problem of goal formulation. At such time the manager can't formulate goal smoothly.
iv) Resistance to change: Sometimes the manager determines the goal but the employee resist the goal. For
example if the organization wants to increase the branch in different districts. So to achieve this goal the
employee have to sacrifice and may go the other places. When new foal are formulated the employee may have
misunderstanding of goal, in such time they reject and go for strike that is the problem of goal formulation.
v) Resource constraint: Sometimes the goal are determined by the manager, but those goals are not based on
the availability of resources of an organization. Sometimes the goal are determined but the resources to fulfill
those goal is limited or scarce that can be also the problem of goal formulation.
vi) Environmental Dynamics: Environment is dynamic or changeable. So the environmental factors are
changeable which may directly affect the organization goal. So the environment dynamics is another problem of
goal formulation. By the dynamics of environmental factors the goal may not be formulated properly.
Types of organizational Goals
Officials goals. These goals are the formally stated goals of an organization described in its charter and
annual reports and they are emphasized in public statements by key executives.
* Operative goals are the outcomes that the organization actually seeks to attain through its operating
policies and activities.
* Operational goals Organizational goals define the performance objectives and desired behaviours within
an organization.
However, a typical social organization today has multiple stakeholders-groups of people, and consequently
has multiple goals, which, at times, may be mutually conflicting.
According to Perrow, multiple organizational goals can be classified into four major categories:
* Output goals. These goals are the "end product," such as consumer products, services, health care, or
education.
* System goals. System goals relate to the organization itself, and they consist of such things as
growth, stability, profit, efficiency, market share.
* Product goals. Product goals consist of the characteristics of the goods or services, such as quality,
styling, uniqueness, variety, and price.
* Derived goals refer to the way an organization uses its power and influence to achieve other social or
political goals (such as employee welfare, community services, or political aims).

Henry Minztberg has provided a different classification of goals:

* System goals. There are four system goals: survival, efficiency, control, and growth.
* Formal goals. Formal goals are used by managers to tell everyone what they are doing.
* Ideological goals. These goals are what the people within the organization believe in.
* Shared personal goals. These goals are what people within the organization come together to

accomplish for their mutual benefit.

Approaches to goal setting

Top-down approach
When goals are set this way, the company generally has to identify a broad set of goals that it would like to
accomplish in the near future. The manager has to then take these broad goals and create objectives for team
members that are aligned with what the company is trying to accomplish.The top-down approach starts at senior
management level.
How does it work?
1) Senior management (such as the Chief Executive, the founder(s) determine the strategic goals for programs
and management functions based on the organizational mission.
2) The heads of programs and management functions determine the goals and objectives for their area of
responsibility based on predefined strategic goals. This process may involve a number of management functions
(department).
3) Supervisor set performance objectives for employees.
Advantages
The top-down approach links goals and objectives to the organizational mission. This will lead probably to more
ambitious goals and objectives than a bottom-up approach.
The organization will be more challenged and moved forward as long as goals and objectives are realistic.
Disadvantages
Ambitious goals and objectives become a problem when the top management is too removed from the reality
within the organization and sets unrealistic goals.
There is also a danger that staff is not fully committed to goals and objectives because they had no say in the
process.
Bottom-up approach
In the bottom-up approach, the members of the team create their own goals. The bottom-up approach starts at
the lower levels of the organization.
How does it work?
Employees set goals and objectives for themselves that result in goals and objectives for programs and
management functions.
Advantage:
This approach will most likely lead to more realistic goals and objectives than through the top-down approach as
people involved have a good insight in what is possible under current conditions.
Staff will be more committed because they strive for goals and objectives that they determined themselves.

Disadvantage:
There is the danger that goals and objectives are too conservative because the staff involved wants to minimize
the risk of failure.
Furthermore, strategic goals may not be aligned to the organizations mission when they are the result of a
bottom-up process.

Purpose of Organizational goals

Provides Focus
When organizations set goals for employees, it shows employees the organization & its priorities. Employees then know what
to focus on in the coming quarter or year, thus prioritizing projects and other tasks as they weigh how their work will impact
those goals. It also provides focus for management when deciding on major projects and how to best divide tasks among
employees.

Increases Motivation
Organizational goals give employees something to strive for in their daily tasks. For example, instead of merely aiming for
general profitability, employees can work to improve profitability 10 percent by year-end. Most people strive to be successful,
but having a specific standard that constitutes success will especially motivate them to strive for excellence. If goals are tied
to other external awards, such as group recognition or rewards, it can further improve the motivation level.

Improves Group Cohesion

Many business goals cannot be reached unless employees of all levels work together as a whole to reach the goals. This can
improve group cohesion and collaboration when employees realize the goals will only be reached when teamwork is present.
Managers can further enforce this through group rewards given when the organization meets its goals.

Increases Employee Worth

Including employees in the goal-setting process will increase their buy-in for the project and the business as a whole. It tells
them their input is valued and important, thus giving them a sense of ownership. Consequently, the goals are no longer only
managements goal; they are the goals of everyone in the organization.

Offers Measurability
Set goals using the SMART principle: specific, measurable, attainable, relevant and timely. This will enable employees to
gauge their progress, see how their efforts are having an impact and assess how far they have yet to go to reach the goal.

Features of effective organizational Goals

It is important that goals meet specific criteria that can be used to easily assess them. One way of doing this is to use the acronym
SMART as a way of evaluating the goal. :
Specific

Measurable

Attainable

Relevant

Time-bound

Specific
A goal is specific when it provides a description of what is to be accomplished. A specific goal is a focused goal. It will state exactly what
the organization intends to accomplish. While the description needs to be specific and focused, it also needs to be easily understood by

those involved in its achievement. It should be written so that it can be easily and clearly communicated. A specific goal will make it easier
for those writing objectives and action plans to address the following questions:
Who is to be involved?
What is to be accomplished?

Where is it to be done?

When is it to be done?

Measurable
A goal is measurable if it is quantifiable. Measurement is accomplished by first obtaining or establishing base-line data. It will also have a
target toward which progress can be measured, as well as benchmarks to measure progress along the way. A measurable goal will answer
questions such as:
How much?
How many?

How will you know when it is accomplished?

Attainable
There should be a realistic chance that a goal can be accomplished. This does not mean or imply that goals should be easy. On the
contrary, a goal should be challenging. It should be set by or in concert with the person responsible for its achievement. The organization's
leadership, and where appropriate its stakeholders, should agree that the goal is important and that appropriate time and resources will be
focused on its accomplishment. An attainable goal should also allow for flexibility. A goal that can no longer be achieved should be altered
or abandoned.

Relevant
Goals should be appropriate to and consistent with the mission and vision of the organization. Each goal adopted by the organization
should be one that moves the organization toward the achievement of its vision. Relevant goals will not conflict with other organizational
goals. As noted earlier, goals are set by or in concert with the person responsible for achievement. It is important that all short-term goals
be relevant (e.g., consistent) with the longer-term and broader goals of the organization.

Time-bound
Finally a goal must be bound by time. That is, it must have a starting and ending point. It should also have some intermediate points at
which progress can be assessed. Limiting the time in which a goal must be accomplished helps to focus effort toward its achievement.

Process of Goal Formation:

Goals are the end-result to be achieved. It directs the activities of the organization. It should be
formulated carefully. It should be specific(S), measurable (M), acceptable (A), realistic (R) and time bound.
The goal formation process comprises of three steps which are explained below:
ENVIROMENTAL SCANNING
FORMATION OF OVERALL GOAL
FORMATION OF SPECIFIC GOAL
Fig: Goal Formation Process
1. Environmental Scanning:
It is the act of acquiring information to, monitor change and development in the environment. The
following information is gathered.
A. Trend in the external environmental forces:
The impact of environmental trend on the organization is analyzed. Generally five year time horizon is taken
for trend analysis. They are PEST:

political-legal : government policy, laws regulation

economical : economic model, inflation, monetary policy, fiscal policy

socio-cultural : change in social and cultural value

technological : level of technology and pace of technological development B. SWOT

Analysis:
Strength, weakness, opportunities and threats analysis is conducted to scan and respond to data. Strength and weakness exists
within the organizations which are under the control of organization.

Opportunities and threats exist in the external environment which is not under the control of
organization.
FORMATION OF OVERALL GOALS:
The second step of goal formation process is formation of overall goals. The high level
executives set the organizations goal, policy, mission, vision and strategy.
FORMATION OF SPECIFIC GOALS:
The final step of goal formation is formation of specific goals. These goals are formed in the basis of
corporate goals. These goals are related to the production, marketing and finance etc. such goals are formed
by the concerned levels or department.

Problems of Goal formulation process:

In the process of goal formulation there are many conflicts are taken place. While determining goal which we have
to face as barriers that is known as problems of goal formation.
1. Inappropriate goals:
Inappropriate goals are the unattainable goals. Too much emphasis on the qualitative and quantitative measures makes the
goal inappropriate. Conflicting goals are also inappropriate goals.

2. Improper reward system

Improper reward system for the achievement of organizational goal can be the problem to goal formation.
Too much emphasis on short-term performance at the cost of long-term problem serves as the problem to goal
formation.
3.Environmental dynamism
Rapidly changing environment can be the problem to goal formation. Technological innovation and intense competition to goal
formation.. Environmental dynamism requires goal revision.
4. reluctant to establish goal:

Lack of confidence, fear of failure and avoidance of accountability makes the managers reluctant to
establish goals. This serves as problem to goal formation
5. Resistance to change:
Change makes thing different. People resist change. The reasons can be fear of unknown, poor communication, loss of job
security and vested interest. This serve as problem to goal formation.

6. Resource constraints
Lack of resource can be the problem to goal formation. Legal restrictions, increasing competition and time
constraints posed problem to goal formation.

Goal Succession:
Every organization has certain goals such goals need to be reviewed time to time, for achieving current
goals new goals are to be developed to meet the need of changing environment or situation after the current
goals. So the act of developing new goals to achieve primary goals or after the current goals is known as goal
succession.
Management must have study of internal and external environment as well as analysis of
sufficient, reliable information and data for the succession of organizational goal.
The main reason for the goal succession is:

Achievement of primary goals

Environmental changes

ambitious to achieve

Goal Displacement:
Sometimes organizational goals need to be completely altered because of government policies,
increasing competition and internal and external environment. So the act of developing completely new goals is
known as goal displacement.
Management must have study of internal and external environment as well as analysis of sufficient, reliable information
and data for the displacement of organizational goal.
The main reason for the goal displacement is:

Goals conflicting with individual goal.

Means
become Ends.

substitution.
Goal
Attitude
of
the
employee

Unclear
and
abstract
goals
Changing perspectives of Organization