What is an Organization? Definition, Features, Examples, Types, & Importance

Our daily life activities are connected with various organizations around us such as hospitals, banks, different departmental stores, and so forth. We are directly or indirectly a part of an organization.

We can not imagine sustaining ourselves without organizations similarly, no organization can without people. But how you can define an organization – here we will discuss different aspects of organizations.

What is an Organization?

An organization is an association of people who come together to accomplish some common goals and objectives by establishing a legal entity. It is also commonly referred to as a company, firm, institution, or association. It is a system that makes works the formal relationships of people.

People having common goals and objectives join the organizations. They establish formal relationships between individuals with certain authority and responsibilities. They perform their tasks based on the rights and duties assigned.

The organization is the foundation where all the management practices come to play. Organizations work based on the division of work and authority and responsibility. The whole task of the institution is divided among its different employees, departments, and units and the necessary power is given to perform the given duties as effectively as possible.

For the smooth flow of activities and constant growth of the institution, proper division of work and proper balance of authority and responsibility is most essential. Organizations need to be more flexible to be strong enough to cope with changing business environments and complexities.

In a nutshell, an organization is called:

  • An association of people with a common goal and integrated effort.
  • A functional entity.
  • A system.
  • A relational framework of responsibility and authority.

Characteristics of Organization

Organizations include the following common characteristics/features. The following characteristics of the organization further help us to understand what includes in it.

Association of People

An organization is a social unit created by the association of two or more people having common goals to attain. While collaborating, they form social bonds in the workplace. Their ability to communicate, work together, and have faith in one another determines whether the institution succeeds or fails.

Related: What is a Group?

Common Goals

It is a fact that organizations are created to attain the common goals of the people associated with them. Organizations may have different goals depending upon their nature like profit maximization, service maximization, creating organizational value, etc.

Deliberate Structure

Organizations do have deliberate structures in which every member is assigned certain authorities and responsibilities. Structure helps to distinguish the jobs of each employee and the decision-making power he holds.

Coordinated Activities

Coordination is the functional activity that creates a synergy effect. Efforts of all members of the organization should be coordinated to achieve common predetermined goals and objectives.

Division of Work

Organizational complex tasks are divided into small activities on the basis of the homogeneity of skills required. It helps to get job specialization. Employees choose jobs on the basis of their skills, ability, and interest while organizations can assign them according to an individual’s skills, abilities, experience, and interests.

Environmental Influence

Every firm must operate in a complex and dynamic business environment. There are different internal and external factors that affect the operations and performance of the firm. On the other hand, the firm does also have an influence on the well-being of its surrounding environment.

Well-Defined Authority and Responsibility Relationships

Organizations also consist of various job positions arranged in a hierarchy with a well-defined responsibility and authority relationship. The manager or high command is always responsible to arrange productive authority-responsibility relationships between employees, different units, and departments of the firm.


One of the main characteristics of an organization is its goal of continuity. Along with the common goal firms also aim to continue their activities endlessly. Predetermined goals may or may not be achieved at the right time. Firms always set new goals and targets to make them continuous after attaining goals.

The directors, managers, management committee, or even shareholders may be changed but the organization continuously operates its activities for years and years.

Also Read: What is Coordination?

What are the Examples of an Organization?

In our daily life, we become a part of different organizations. Some of the common examples of organizations are:

  • Schools
  • Banks
  • Hospitals
  • NGOs
  • INGOs
  • Government Organizations
  • Universities
  • Colleges
  • Departmental Stores
  • Clubs
  • Political Parties, etc.

Types of Organization

Normally you can find different types of organizations. They are different in their culture, values, size, nature, products, and many more. But all these types of organizations can be categorized into four types. They are:

Formal Organization

A formal organization is one that is established complying with the standard law, rules, and regulations to accomplish common goals and objectives. It has well-defined working systems, clear jobs, balanced authority-responsibility, a communication system, and a healthy working environment.

They deliberately follow the rules and regulations implied by the government and are registered in the registrar’s office. Schools, Colleges, Hospitals, Government Organizations, etc. are some examples of formal organizations.

Related: Formal Vs. Informal Organization

Informal Organization

It is the opposite of formal organization. A group is formed inside the formal organization without the consent of officials which is called an informal organization. Their main objective is to meet the common interest of their group members.

Such groups are not formed by the authoritative bodies of the institution. They have a specific purpose and sometimes their purpose does not match with the formal institution which results in organizational conflicts.

Profit-Oriented Organization

These are the organizations whose main objective is profit maximization. They are formed legally and sell their products for profit motive. Such as private schools, business firms, private hospitals, etc. are examples of profit-oriented organizations.

Service-Oriented Organization

These organizations’ objective is to provide service to general people without the costs. They are also legally formed with the objective of service. Such as government schools, government hospitals, and different NGOs whose goal is to provide service are examples of service-oriented organizations.

Also Read: What is Organizing?

Importance of Organization

Organizations have been playing a significant role in our life. Different organizations have facilitated different products and services and eased our life for the better.

For example, we are able to get treatment for our diseases from hospitals, we can manage our money because of different banks, and so forth. The importance of organizations can be pointed out below:

  • It makes our life easy.
  • Provides employment opportunities.
  • Improves people’s life and living standards.
  • Ensures the effective utilization of different machinery and natural resources.
  • Brings creativity.
  • Builds formal human relationships and coordinates collective efforts for goal achievement.
  • Supports economic growth.
  • An income source of government (taxes), etc.

In conclusion…

Hence, an organization is a legal entity with an association of people that manages people with common interests and drives their collective efforts as a tool to achieve predetermined organizational goals and objectives. It is made by people and serves people.

Read Next: What is Diversity in the Workplace?

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