[Commerce Class Notes] on Formal Organization Pdf for Exam

A formal organization is a social system formed by clearly laid down rules, set goals, and that function relies on the division of labour with a clearly defined hierarchy of power.

In Line and Staff organization, a manager is responsible to establish the goals and directions that are to be fulfilled by the staff and other workers. A line-staff organizational structure made an effort to offer large and complex  organizations more flexibility without giving up managerial authority.

Process of Organization

The process of organization involves the following steps.

1. Determination and classification of the activities of the firm

2. Categorizing the activities into workable departments

3. Allotment of authorities and responsibilities on the departmental executives for managing the assigned tasks.

4. Developing relationships amidst superior and subordinate, within the department or unit

5. Preparing policies for proper coordination between the superior and subordinate and creating specific lines of supervision.

There are two main categories of organisation, (i) Formal Organisation & (ii) Informal Organisation.Formal organisation is an organisation structure where authorities and responsibilities are clearly defined. It has a defined delegation of authority and roles and responsibilities for the members. Formal organisation structure is created by the management with the motive of attaining the organisational goals.

There are several types of formal organisation based on their structure, which are as follows:

Characteristics of Formal Organizations

The following are the characteristics of formal organizations.

1. Allocation of labor and related hierarchy of power and authority

2. Documented authorities, policies, practices, and goals

3. Individuals act together to achieve a shared goal, not individually

4. A specific chain of command is followed by communication

5. A specified system for replacing members within the organization

6. This type of organizational structure is not dependent on the existence or participation of specific individuals.

Line and Staff Organization

In a centralized structure, decisions are made by the managers and the decisions are flown downward through the enterprise. However, as an organization grows in scope, complexity increases, they need to be flexible with the control as centrally applied. The principle of line-staff organization introduces this flexibility into hierarchical lines of authority, in a try to maintain a unified command structure.

Line groups are engaged in tasks that focus on the technical core of the firm. They are involved in achieving the primary objective of the enterprise. Line groups have the final decision-making authority in relation to the technical organizational purposes.

Staff groups are in tasks that provide support to the line groups. Their work is like that of advisory (legal), service (human resource), or control (the accounting) groups. Staff groups support those who are engaged in the central productive activity of the enterprise. They back up their work. Staff groups help the organization in analyzing, researching, counseling, monitoring, and evaluating activities.

Level 1 is MANAGING DIRECTOR who has three subordinates 

1. Production Manager

It has further two subordinates

2. Marketing Manager 

It has further two subordinates

3. Finance Manager

It has further two subordinates

• Accountant

• Chief Accountant

Difference between Line and Staff Organization

The difference between the line and staff is better than we draft in points.

Difference 1. Purpose

Line Organization’s purpose is to work directly toward the organisational goals, while staff advises, assists, and back to the line group to work towards the set goals. This is the main difference.

Difference 2. Authority

Yet another important difference is authority. Line authority is considered or visualised as the formal authority which is created by the organisational hierarchy. Staff groups do not get any such recognition.

Difference 3. Personality of Individuals

The final point of difference between the line and staff in some organisations arises from the personality possessed by such individuals who are involved in these groups. Line managers are usually the senior people, and tend to be partially educated, and have risen through the hierarchy of the organisational staff, while specialists are the younger ones, to be much educated, and to have been hired directly into the upper-level staff positions because of their expertise in their field. This difference might be a major source of line-staff conflict.

Advantages of Line and Staff Organization

This organisation has the following advantages:

1. Specialization

Line and staff organisation introduces a specialization in a very systematic manner. Specialized knowledge and hierarchy roles are combined here.

2. Better Discipline

The unity of command is maintained by the line managers hence in this type of organisation discipline is maintained. The workers get command from the line personnel and are accountable directly to them. This creates a better moral and discipline among the employees.

3. Balanced and Prompt Decisions

The managers have the advantage of expert advice from the staff managers while taking important decisions. Also the staff are too consulted to investigate and advise, and thus dual advice creates balanced and prompt decisions.

4. Growth and Expansion

The line and staff organisation, both are well suited for the growth and expansion.

5. Development of Employees

This organisation provides great scope for advancement of career to the talented employees.

6. Lesser Burden on Line Officers

With the assistance of staff officers, the burden of the line officers is greatly reduced. The specialist’s advice helps the line officers in deciding their work of specialization.

7. Quick Actions

The line officers have sufficient time to work. When there is a need for certain decisions, they will be able to give time and decide the things as part of their decisions are also handled by the staff managers.

Factors Affecting Organizational Structure

1. Size

Size is one of the important factors which affect an organizational structure of the company. Smaller or home-based businesses normally do not require a large structure, and the business owner is usually responsible for all the tasks.

2. Life Cycle

The life cycle of the company plays an essential role in the development of its organizational structure. Companies generally develop an organizational structure to define their vision, mission and goals in the growth phase.

3. Strategy

Strategy considerably affects the development of an organizational structure of the company. High-growth companies typically have smaller organizational structures so that they can react to changes in the business environment faster than other companies.

4. Business Environment

The external business environment is an essential aspect to be taken into account during the development of an organizational structure of the company. Dynamic environments with constantly changing consumer behavior are generally more turbulent than stable environments.

Features of Line and Staff Organization

1. Two types of staff:

1. Staff Assistants

2. Staff Supervisor

2. Line and Staff Organization is a new form of line organization. It is a more complex structure than line concern.

3. Division of work and also specialization takes place in line and staff organization.

4. The whole organization is divided into functional areas to which staff specialists are attached.

5. Efficiency can be achieved through the features of specialization by the staff managers.

6. There are two lines of authority which flow at one time in an organization:

1. Line Authority

2. Staff Authority

7. Authority to command remains with the line executive and staff officers serves only as counsellors.

Line and Staff Organizational Structure

Line and staff organization is a modified version of the line organization. This is more complex than the line organization. According to this structure, the administrative organization which is specialized and performs supportive activities are attached to the line of command done by appointing staff supervisors and staff specialists who are attached to the line authority. The power of command anyway remains with the line executives and staff guides, advises and counsels the line executives.

Line and Staff Organisation structure is quite modern which is taken up by the corporate sector to provide flexibility as well as accountability.