Organizations

Organizations are structured groups of people, roles, resources, rules, and activities that work toward one or more purposes. Organizations can be formal or informal, small or large, temporary or long-lasting, centralized or decentralized.

Examples include businesses, nonprofit organizations, governments, schools, universities, cooperatives, religious groups, labor unions, research institutes, clubs, online communities, and volunteer projects.

Organizations are important because many goals are difficult for one person to accomplish alone. Large projects often require people to coordinate labor, knowledge, money, equipment, information, and decision-making.

Organizations can also create their own problems in living. Poor communication, excessive bureaucracy, unclear authority, weak incentives, conflict, corruption, poor leadership, and badly designed systems can make an organization less effective.

Learning how organizations work can therefore be useful for management, leadership, research, group work, economics, sociology, and problem solving.

Why organizations exist

Organizations generally exist because people want to accomplish something that requires coordination.

A person can write a book alone. Building a hospital, operating a university, manufacturing automobiles, running a transportation network, or conducting a large scientific project normally requires many people.

Organizations can help people:

Divide work Specialize Share resources Coordinate decisions Maintain records Pool money Train people Preserve knowledge

Manage large projects Set standards Resolve disputes Maintain infrastructure Serve customers or members Conduct research Produce goods and services Continue work over long periods

An organization can also outlast the people who originally created it.

This can be useful because knowledge, infrastructure, and long-term projects do not need to disappear every time an individual leaves.

Types of organizations

Organizations can be categorized in many ways.

Businesses generally provide goods or services in exchange for revenue.

Nonprofit organizations may pursue educational, charitable, scientific, cultural, religious, or other missions.

Government organizations administer public programs, laws, infrastructure, services, or regulatory functions.

Cooperatives are organizations owned or controlled by members such as workers, consumers, producers, or residents.

Labor unions organize workers for purposes such as collective bargaining, representation, education, and workplace advocacy.

Research organizations conduct scientific, technical, social, or other forms of research.

Schools and universities organize teaching, learning, credentialing, administration, and research.

Informal organizations may exist without incorporation, formal leadership, or written rules. A neighborhood group, research collective, or online project can still function as an organization even if its structure is minimal.

Organizational structure

An organizational structure defines how responsibilities, authority, and communication are arranged.

A traditional hierarchy may have several levels of management.

For example:

Director
    |
Managers
    |
Supervisors
    |
Workers

Other organizations may use flatter structures with fewer levels of authority.

Some organizations use teams, committees, distributed networks, autonomous working groups, or combinations of several structures.

There is no single structure that works best in every situation.

A military organization, research laboratory, worker cooperative, software project, and neighborhood association have different needs.

The important question is whether the structure helps the organization accomplish its purpose.

Roles and division of labor

Organizations often divide work into roles.

A role may describe:

• Responsibilities
• Authority
• Required skills
• Reporting relationships
• Decision-making powers
• Expected outcomes

Division of labor allows people to specialize.

A hospital can have physicians, nurses, laboratory workers, technicians, administrators, researchers, food service workers, maintenance workers, and many other roles.

Specialization can improve efficiency and expertise.

It can also create communication problems.

Someone may understand one part of a system extremely well while having little knowledge of what happens elsewhere.

Effective organizations often need ways for specialized groups to communicate across boundaries.

Leadership and management

Leadership and management are related but not identical.

Management often involves planning, scheduling, budgeting, staffing, organizing work, monitoring performance, and maintaining systems.

Leadership often involves setting direction, building cooperation, helping people understand priorities, resolving uncertainty, and influencing how people work together.

Both can be useful.

An organization with inspiring goals but poor administration may fail to complete basic work.

An organization with excellent administration but no useful direction may efficiently accomplish things that do not matter.

Organizations benefit when leadership and management support the actual purpose of the organization.

Decision-making

Organizations need methods for making decisions.

Methods can include:

Decisions by owners Executive decisions Management decisions Majority voting Consensus Board decisions

Worker participation Delegation Member voting Expert recommendations Committee decisions Automated decision systems

Different decisions may use different processes.

It may be inefficient for every employee to vote on every routine purchase.

At the same time, concentrating every decision in one person can slow the organization and prevent people with relevant knowledge from acting.

A useful organization often decides not only what decisions need to be made, but who should make them and what information should be available before the decision.

Communication

Organizations depend on communication.

Information can move through:

• Meetings
• Email
• Chat systems
• Wikis
• Reports
• Project management software
• Policies
• Procedures
• Informal conversation
• Databases

Communication problems can occur when information is missing, delayed, contradictory, excessive, or sent to the wrong people.

Too little communication creates uncertainty.

Too much communication can create noise.

An effective communication system helps people receive the information needed to do their work without requiring everyone to process everything happening in the organization.

Wikis can be useful for documenting knowledge that people may need repeatedly.

Organizational culture

Organizational culture refers broadly to shared expectations, habits, values, assumptions, and behaviors within an organization.

Culture can influence whether people:

• Share information
• Admit mistakes
• Ask questions
• Challenge leadership
• Help coworkers
• Take initiative
• Avoid responsibility
• Experiment with new ideas

Written policies are only part of organizational culture.

An organization may officially encourage openness while informally punishing people who raise concerns.

Another organization may have few written rules but strong expectations of cooperation and accountability.

Researching organizational culture can therefore require examining both formal rules and actual behavior.

Incentives

People respond to incentives.

Organizations may use:

• Pay
• Promotions
• Recognition
• Bonuses
• Ownership
• Autonomy
• Status
• Job security
• Mission
• Social relationships
• Opportunities to learn

Poorly designed incentives can produce unintended behavior.

For example, measuring workers only by speed may reduce quality.

Rewarding managers only for short-term financial results may encourage decisions that create long-term problems.

Organizations should therefore examine what behavior their incentive systems actually encourage.

Bureaucracy

Bureaucracy can help organizations operate consistently.

Standard procedures can make it easier to train people, document decisions, maintain safety, and reduce arbitrary treatment.

Bureaucracy can also become excessive.

A process that originally solved one problem can remain in place long after the problem disappears.

Organizations can accumulate forms, approvals, committees, policies, and procedures until simple work becomes difficult.

Regular review can help determine whether administrative systems still serve a useful purpose.

Organizations and problem solving

Organizations can be created specifically to solve problems in living.

A company may attempt to solve transportation problems.

A research institute may study disease.

A nonprofit may work on hunger or education.

A neighborhood organization may address local safety or infrastructure.

A useful approach is to connect organizational activity with measurable problems and outcomes.

For example:

1. Identify a problem.
2. Define the desired outcome.
3. Determine what resources are required.
4. Create or modify an organization capable of doing the work.
5. Assign responsibilities.
6. Implement the plan.
7. Measure results.
8. Identify failures or unintended consequences.
9. Change the organization or strategy where necessary.

Organizations should not assume that continued activity automatically means success.

A large budget, many employees, and many meetings do not prove that a problem is being solved.

Learning organizations

A learning organization attempts to improve by learning from experience.

This can involve:

• Recording what happened
• Measuring outcomes
• Studying failures
• Sharing knowledge
• Training workers
• Encouraging questions
• Testing new approaches
• Updating procedures
• Preserving useful institutional knowledge

Organizations can lose knowledge when experienced people leave.

Documentation, mentoring, training, and knowledge management can help reduce this problem.

A wiki can be one tool for maintaining organizational memory.

Decentralized organizations

Some organizations attempt to distribute authority.

Decentralized structures can give smaller groups greater freedom to make local decisions.

Potential advantages include faster adaptation, experimentation, and reduced dependence on one central authority.

Potential problems include duplication, inconsistent standards, unclear responsibility, and difficulty coordinating large projects.

Centralized and decentralized organization should not necessarily be treated as opposites.

An organization can centralize some functions while decentralizing others.

For example, accounting standards might be centralized while product development is handled by relatively independent teams.

Technology and organizations

Technology can change how organizations operate.

Remote work, cloud computing, artificial intelligence, automation, collaborative software, and digital communication can allow people to coordinate across large geographic distances.

Some organizations may eventually include both human workers and automated agents performing substantial amounts of work.

Technology can reduce administrative work, but poor systems can also create additional bureaucracy.

The important question is whether technology improves the organization's ability to achieve useful outcomes.

Measuring organizational effectiveness

Organizations can be evaluated using many measures.

Possible measures include:

Cost Revenue Quality Reliability Productivity Safety Customer satisfaction

Employee retention Research output Social impact Response time Innovation Sustainability Progress toward mission

The appropriate measure depends on the organization's purpose.

A nonprofit food bank and a semiconductor company should not necessarily be evaluated using identical criteria.

Multiple measures are often necessary because optimizing one number can damage something else.

Discussion questions, essay ideas, and learning related AI prompt ideas

• Why do organizations exist?
• When is an organization preferable to individual action?
• What are the advantages and disadvantages of hierarchical organizations?
• When should authority be centralized?
• When should authority be decentralized?
• How can organizations reduce unnecessary bureaucracy?
• What makes an organizational culture productive?
• How should organizations measure whether they are actually succeeding?
• How do incentives change organizational behavior?
• Why do organizations sometimes continue programs that do not work?
• How can organizations preserve knowledge when experienced workers leave?
• What types of organizations are best suited to solving large problems in living?
• How can wikis improve organizational knowledge?
• How might artificial intelligence change organizational structures?
• Ask an AI system to compare a hierarchical business, worker cooperative, nonprofit organization, and decentralized project.
• Ask an AI system to redesign a hypothetical organization with slow decision-making and excessive bureaucracy.
• Design an organization specifically intended to solve one important social or technological problem.
• Compare centralized and decentralized decision-making using a real organization as a case study.

Wikipedia readings

• Organization
• Organizational structure
• Organizational culture
• Management
• Leadership
• Bureaucracy
• Division of labour
• Learning organization
• Cooperative
• Nonprofit organization
• Decentralization
• Organizational behavior

See also

Group work Collaboration Leadership Management Organizational psychology Organizational culture Business Nonprofit organization Cooperative National Research Center for Women & Families Centre for Global Morality Labor union

Decision making Research organization Bureaucracy Decentralization Communication Problem solving Problems in living Learning organization Knowledge management Project management Economics Sociology