Organising: principles, organisation structure, line, staff, functional, project and matrix forms, formal and informal organisation

Principles and Practice of Management · Unit III · Topic 8 of 14 · 5 min read

Meaning and principles of organising, the forms of organisation structure with merits and demerits of each, and the distinction between formal and informal organisation with examples.

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1. Meaning of organising
2. Principles of organising
3. Forms of organisation structure
4. Formal and informal organisation
How this is examined

Cases checked to exist. Read the judgment before quoting a holding.

Every case cited here has been checked to exist — the citation resolves and names the right parties. The propositions attributed to each case have not been verified line by line against the judgment. Case names link through to the full judgment: read it before quoting a holding in an examination answer, and never carry a proposition from notes into court on trust.

The examinable core. Unit III question 3(a) is one of three things: the principles of organising, the forms of organisation (or one of them, with merits and demerits), or formal versus informal organisation. Learn a list of about twelve principles, the five main forms with two merits and two demerits each, and a comparison table for formal and informal.

1. Meaning of organising

Organising is the process of identifying and grouping the work to be done, defining and delegating responsibility and authority, and establishing relationships so that people can work together most effectively towards objectives (Louis Allen). Its steps are: identify the activities; group them into departments; assign them to positions; delegate authority; and establish reporting relationships. The result is the organisation structure, the formal pattern of jobs and authority shown on an organisation chart.

2. Principles of organising

Unity of objectives — every part of the structure should serve the common objective.
Specialisation (division of work) — each person performs a limited set of tasks.
Span of control — a limit to the number of subordinates one superior can supervise effectively.
Scalar principle — a clear line of authority from top to bottom.
Unity of command — one superior for each subordinate.
Parity of authority and responsibility — authority equal to the responsibility assigned.
Absoluteness of responsibility — a superior cannot escape responsibility by delegating.
Delegation — authority should be delegated as far down as possible.
Exception principle — only exceptional matters should go to the top; routine ones are settled lower down.
Balance — between centralisation and decentralisation, and between departments.
Flexibility — the structure should adapt to change.
Continuity — the structure should outlast individuals.
Co-ordination and simplicity.

3. Forms of organisation structure

Line (military, scalar) organisation

Authority flows in a straight vertical line from top to bottom; each person has one superior. Merits: simple, clear authority and responsibility, quick decisions, strict discipline, economical. Demerits: overloads the top executives, no specialists, rigid, encourages autocracy, poor communication across departments. Suited to small firms.

Functional organisation

Developed from Taylor’s functional foremanship: specialists in each function (production, marketing, finance, personnel) have authority over that function across the whole organisation, so a worker receives orders from several functional heads.

Advantages:

Benefits of specialisation and expert guidance.
Reduces the burden on line executives.
Better quality and efficiency.
Easier to train specialists and to expand.

Disadvantages:

Violates unity of command; workers are confused by several bosses.
Difficult to fix responsibility for poor results.
Co-ordination between specialists is hard; conflicts arise.
Costly, because of many specialists; slow decisions.

Line and staff organisation

The line structure is kept, and staff specialists (legal adviser, cost accountant, personnel officer) are attached to advise line managers. Staff have no authority to command; they advise, and the line decides. Merits: expert advice with unity of command, relief for line executives, better decisions, flexible. Demerits: line-staff conflict (line resents advice; staff complains it is ignored), staff may be blamed without power, costly. This is the form most large organisations use.

Line, staff and functional authority. Line authority is the right to command. Staff authority is the right to advise. Functional authority is the right of a specialist to give orders in his own field to people outside his own department (the finance manager prescribing accounting forms for the sales department). An answer that separates the three earns more than one that uses “staff” loosely.

Project organisation

A temporary structure set up for a specific project with a fixed end, such as building a plant or launching a product. A project manager is appointed and staff are drawn from different departments for the duration. Merits: single point of responsibility for the project, focus on deadlines and costs, team of mixed skills, temporary so no lasting overhead. Demerits: insecurity of staff when the project ends, duplication of resources across projects, conflict between project and functional heads, and loss of specialist development while away from the department.

Matrix organisation

A combination of functional and project structures: each person reports both to a functional head and to a project manager. It gives flexibility and the use of specialists across several projects, but it breaks unity of command and needs careful co-ordination.

Committee organisation

A group of persons to whom a matter is referred for decision or advice. Committees pool knowledge and ensure representation and co-ordination, but they are slow, costly, and dilute responsibility (“a committee is a group that keeps minutes and loses hours”).

4. Formal and informal organisation

The formal organisation is the deliberately planned structure of roles and authority, set out in the organisation chart and manuals. The informal organisation is the network of personal and social relationships that arises spontaneously among people who work together. The Hawthorne bank wiring room showed how strongly an informal group can control output.

Basis	Formal	Informal
Origin	Deliberately created by management	Arises spontaneously from social interaction
Purpose	Organisational goals	Members’ social needs
Authority	Flows from position, downwards	Flows from personality and acceptance, any direction
Communication	Official channels	Grapevine
Rules	Written rules and procedures	Group norms
Stability	Stable	Fluid, changes with members
Shown on chart	Yes	No

Example. In a law firm the formal structure has partners, senior associates, associates and clerks in defined reporting lines. Informally, associates who joined in the same year may form a lunch group; news of an impending merger travels through it before any circular is issued, and a senior clerk may have more practical influence than his position suggests.

Benefits of informal organisation: satisfies social needs and builds morale, quick communication, fills gaps in formal plans, helps on-the-job learning. Problems: rumours, resistance to change, group norms that restrict output, and conflict of roles. Management should understand it and use its leaders, not try to suppress it.

How this is examined

The principles of organising have been set in January 2026 (16 marks), January 2025 and August 2024 (10 marks each). Formal and informal organisation: June 2025 (“with example”) and August 2024. Forms of organisation: April 2023. The project structure with merits and demerits: June 2025. The advantages and disadvantages of functional organisation: January 2026, Q.9.

When an example is asked for, give a concrete one, as above; the generic “friends at work” earns little.

Now try the real questions: Principles and Practice of Management past question papers.