Everything you need to know about the importance of organisational structure. Sound organisation is a must for every enterprise not only for its continuity but also for its success.

It is the backbone of a management and without it; no management can manage the various operations of an enterprise. It lays the basis for other managerial functions such as planning, direction, co-ordination and control. It is the means by which the problems of an enterprise relating to policies, procedures, operations and administration can efficiently be solved.

Organisation is a mechanism which consists of formal organizational structure of role, relationship, position and authority. It facilitates the other functions of management. It is the foundation upon which the whole structure is built; which contribute to the success and survival of the enterprise. Organisation is also essential for the continuity and stability of the enterprise.

The importance of sound and ideal organizational structure can be studied under the following heads:-


1. Facilitates Administration 2. Promotes Growth and Diversification 3. Fosters Co-Ordination 4. Provides for the Optimum Use of Technological Innovations 5. Enlarges Abilities 6. Permits Optimum Use of Resources 7. Stimulates Creativity

8. Aid to Management 9. Facilitates Growth of Enterprise 10. Executive Development 11. Ensures Co-Operation among Workers 12. Training and Development of Personnel 13. Encourages Initiative 14. Better Human Relations and a Few Others.

Importance of Organisational Structure

Importance of Sound Organisational Structure– Facilitates Administration, Promotes Growth and Diversification, Fosters Co-Ordination and a Few Others

The importance of sound organisational structure can hardly be over emphasized. Organisation is one of the basic functions of management. Its importance lies in the systematically evolved pattern of relationships designed to set in motion the processes of managerial functions.

An organisation is not merely a chart or a lifeless structure. It comprises people and it is the agency through which management performs the important functions of direction, co-ordination and control. In this sense, it is the foundation of management as well as its chief tool.


Following are some of the important advantages of a sound organizational design which have enhanced its importance and have, therefore, made it indispensable:

1. It Facilitates Administration:

The function of organizing is required for the performance of other functions of management like planning, staffing, directing and controlling. Inadequate and unscientific organisation may result in duplication of work and efforts and some of the important operations may be left out. Sound organisation facilitates the performance of various managerial functions by division of labour, consistent delegation or job definition and clarity of authority and responsibility relationship.

2. It Promotes Growth and Diversification:


Only sound organisation designed on scientific principles can create conditions conducive to planned expansion and diversification of the activities of the enterprise. Sound organisation helps in keeping the various activities under control and increase the capacity of the enterprise to undertake more activities.

3. It Fosters Co-Ordination:

It is an important means of bringing co­ordination among the various departments of the enterprise. It creates clear cut relationship between the departments and helps in laying down balanced emphasis on various activities. It also provides for the channels of communication for the co­ordination of the activities of different departments.

4. It Provides for the Optimum Use of Technological Innovations:


A sound and ideal organizational structure is not rigid but it is flexible to give adequate scope for the improvements in technology. It facilitates in introducing changes in the enterprise by modifying the authority and responsibility relationship in the wake of new developments.

5. It enhances the productivity through avoidance of duplication of activities and the consequential confusion as well as wastage of efforts.

6. It Ensures an Optimum Use of Human Resources:

Sound organisation matches the jobs with the individuals and vice-versa. It ensures that every individual is placed on the job for which is best suited. This helps in the better use of individuals working in the enterprise.


7. It Stimulates Independent, Creative Thinking and a Spirit of Initiative through Well-Defined Areas of Work:

An ideal organizational structure based on clear-cut demarcation of authority, higher range of responsibility, discretionary freedom granted to personnel, incentives offered for specialized work etc., will certainly foster the spirit of constructive and creative approach in management. Such an atmosphere will give an opportunity for the staff to display their hidden creative talent, which, in turn, will lift the enterprise to higher goals of business and profits.

8. It Provides Ample Scope for Training and Development:

An effective organisation facilitates delegation of authority which is an important device for training and developing the personnel. Delegation of authority is also an important means of directing the sub-ordinates. It prepares them to take more responsibilities whenever need arises.


9. It Prevents the Growth of Laggards, Wirepullers, Intriguers or other Forms of Corrupters:

As a matter of fact, experience shows that corruption can only thrive in those enterprises which have failed to set up a sound organisational structure. Unsound organisation becomes the breeding ground of dishonesty, whether in matters of effort or of money.

With the passage of time, however, even a good organisation may be transformed into a bad one unless continual adjustments are made with the varying circumstances. Effective management implies managerial adaptability to changing situations within the dynamic framework of an organisational structure.

In short, properly conceived, ideal organizational structure is sure to demand creative result from creative people and will drain routine and repetitive work to supporting positions and will at the same time, by establishing clear cut, accountability, provide recognition for the professional and the specialist in terms of their achievement. It is in this sense it is claimed that there is no substitute for good organisation.

Importance of Sound Organisational Structure– Enlarges Abilities, Facilitates Administration, Facilitates Growth and Diversification and a Few Others

Sound organisation is an essential prerequisite of efficient management.


It helps an organisation in the following ways:

1. Enlarges Abilities:

It helps individuals to enlarge their capabilities. Division of work enables an individual to specialize in the job in which he is proficient leading to better utilization of resources and talents.

2. Facilitates Administration:

It facilitates administration by avoiding waste motions, overlap in work and duplication of effort. Departmentation enables proper planning of work. Confusion and misunderstanding over who is to perform what work is avoided by specifying the role of managers clearly. Proportionate and balanced emphasis is put on various activities.


3. Facilitates Growth and Diversification:

Sound organisation helps in keeping activities under constant vigil and control. The organisation can undertake more activities without dislocation. Talents and resources are put to good use. Opportunities are seized quickly and exploited fully, ultimately, paving the way for growth and diversification.

4. Permits Optimum Use of Resources:

Human, technical and material resources are put to good use. Right persons are given right jobs. There is proper allocation of work. People know that they are supposed to do, well in advance. Necessary functions are determined and assigned so that personnel and physical facilities are utilized effectively.

5. Stimulates Creativity:

If offers stimulating opportunities to people at all levels to use their skills on jobs best suited to their nature. Delegation helps people at lower levels to do more challenging work. The higher-ups, in turn, can concentrate on strategic issues-putting their creative abilities to good use.


6. Facilitates Coordination:

Organisation is an important way of achieving coordination among different departments of an enterprise. Clear au­thority relationships and proper assignment of work facilitate the task of achieving coordination at all levels. Poor organisation leads to improper arrangement of duties and responsibilities. As a result, unimportant and trivial issues are given top priority.

Activities that should be integrated or centralized are spread out and put to improper supervision. Incom­petent individuals are overused while talented people are under-utilized. Delays, duplications and waste motions occur with frustrating regularity. Expenses mount up. These would create utter confusion, chaos and conflict. Poor organisation may mean improper arrangement of facilities and failure to achieve goals.

Importance of Sound Organisational Structure – Aid To Management, Facilitates Growth of Enterprise, Stimulates Creativity, Adoption of New Technology and a Few Others

Sound organisation is a must for every enterprise not only for its continuity but also for its success. It is the backbone of a management and without it; no management can manage the various operations of an enterprise. It lays the basis for other managerial functions such as planning, direction, co-ordination and control. It is the means by which the problems of an enterprise relating to policies, procedures, operations and administration can efficiently be solved.

As Lounsburry Fish points out-“Organisation is more than a chart, it is the mechanism through which management directly co-ordinates and controls the business. It is indeed the foundation of management”.

Another management expert Kenneth C. Towe states that—”A sound form of organisation is the answer to every business problem, that a poor organisation could run a good product into the ground and that a good organisation with a poor product could run a good product out of the market”.


With these general remarks, now we state here the important advantages of organisation:

(1) Aid to Management:

Organisation aids management in accomplishing enterprise objectives. It helps management in performing other management functions such as planning, direction, delegation, control etc. It increases management’s efficiency and promptness, avoids delay and duplication of work and motivates the employees to perform their job efficiently. It lays solid ground-work for focusing the attention and action of management on the accomplishment of the objectives of enterprises.

(2) It Facilitates Growth of Enterprise:

An organisation is concerned with activities such as recruitment of staff, delegation of authority, assignment of responsibility co-ordination and control of activities at different work centres, etc. With these activities the organisation provides a framework within which the company grows. Thus, organisation facilitates the growth of enterprise.

(3) It Ensures Optimum Use of Human Resources:


Organisation affects human resources in a number of ways such as recruitment, training, placement of workers, bringing harmony in their efforts, improving the communication network and motivating them to improve their efficiency. All these ensure an optimum use of human resources of an enterprise.

(4) It Stimulates Creativity:

Sound organisation stimulates creative thinking and initiative on the part of employees. Delegation of authority provides sufficient freedom to supervisors and this encourages initiative, creative thinking, resourcefulness, independent thinking spirit of innovation and enterprise among them.

(5) It Encourages Human Use of Human Resources:

A sound organisation provides for job rotation and job enlargement and makes job meaningful and interesting. It also provides for efficient methods of selection, training and promotion of employees, further not as machines. Thus, it facilitates human use of human beings.

(6) It Facilitates Stability of Enterprises:


A sound organisation has flexibility to adjust to the changes in the conditions, promotes effective leadership, promotes employees morale, provides for delegation of authority and develops co­ordination, co-operation and communication. All these factors assure stability to the enterprises.

(7) Adoption of New Technology:

A sound organisational structure facilitates the optimum use of technological improvements such as automatic techniques of production, control devices, computer system etc. It accommodates new ideas in respect of organizational relationship while retaining its basic structure.

(8) Executive Development:

A sound organisation by providing for training of staff at different levels and by proper delegation and decentralization helps development of managers.

(9) It Ensures Co-Operation among Workers:

A good organisation promotes mutual goodwill and co-operation among workers also. It disposes of conflict between individuals; individuals and the enterprises, enterprise and the economy as a whole. It gives proper recognition to the contribution of each individual, values their co-operation hence gaining their sincerity and loyalty.

Good organisation removes red-tapism and corruption, prevents duplications of work, makes communication easier, and provides a sound basis for workers participation in the management.

In short, a properly conceived organisation structure facilitates effective communication, precise delegation, smooth management, proper co-ordination and control, closer co-operation, effective leadership, higher employee morale, managerial efficiency, steady growth and diversification, optimum use of human and other resources, optimum use of technological improvements development of managers, creativity among the staff and accomplishment of enterprises objectives.

Therefore, in the end we can say that organisation helps to improve the operations of the business as a whole. It is not simple organising function of management, it is more than that. To sum up, it is the enterprise. That is why, it is generally said that organisation is the machinery of management in its achievement of the ends determined by administration.

Importance of Sound Organisational Structure – Some Typical Results Provided by a Sound Organisation

Organisation is a fine structured process in which indivi­duals interact (acting and reacting upon one another) to ac­complish objectives. Organisation is, however, more than a chart. It is, indeed, the foundation of management. A manager leads, co-ordinates and controls the enterprise activities through the organisation.

If an organisation is ill-designed and reveals a number of deficiencies, management is rendered difficult and ineffective. Organisational deficiencies give rise to a number of inefficiencies, e.g. slow and poor decisions, lack of co-ordi­nation of activities, poor specification of duties, destructive conflict among members, non-synchronised timings in actions of individuals, sluggishness in response to changes in techno­logy and environment, etc.

Sound and well-designed organisa­tion, on the other hand, improves company administration, encourages growth and diversification and tones up overall operations of the company. Sound organisation alone assures accomplishment of objectives and strategies as per predeter­mined plans and policies.

Sound organisation is a fine mecha­nism enabling people (living things) to collaborate and work together for integrated effort.

Sound organisation (as a founda­tion for management process) can provide following typical results:

i. It is more than a mere chart—it is the best mecha­nism for management in action, i.e., leadership, motivation, coordination and control.

ii. Well-designed and balanced organisation facilitates management and operations of the enterprise.

iii. Sound organisation facilitates precise and effec­tive delegation. By proper division of work, grouping tasks of individual jobs, grouping jobs or people into sections and de­partments, we can adopt consistent delegation and decentrali­sation, when necessary.

Thus routine duties can be transferred to subordinates so that superior line officers can concentrate on policy formation and forward planning. Authority, and respon­sibility for operating or routine decisions can be delegated closer to the operating levels.

iv. Effective organisation enables growth and diversification through decentralisation and divisionalisa­tion on geographical or product basis. We may have top manage­ment in the hands of a few chief executives forming a top level executive committee running the affairs of very big enter­prise. There may be a collective office of the chief executive to direct all operating and staff departments.

Instead of a single chief executive in a large company, Peter Drucker would prefer a team with a captain who is more than one among equals and each member of the top management team has assigned areas in which he makes formal decisions and for which he is res­ponsible.

Similarly, extensive use of staff specialists and creation of a good management information system together with elec­tronic data processing (EDP) equipment will help manage effectively a multi-national company.

v. Sound organisation provides for optimum use of technological improvement. Increasing use of automation and computers have a tendency toward centralisation as these new equipments are concentrat­ed at one location and they do help centralised decision-making.

vi. Sound organisation encourages human use of human re­sources. People can work in teams and not like robots or ma­chines. Organisation provides job rotation, job enlargement and enrichment. Jobs are designed to suit human needs. Jobs are made challenging, meaningful and interesting.

Organisation has efficient methods of selection, training, remuneration and promotion of employees. Proper delegation and decentralisation helps development of managers. Democratic and participative leadership offers satisfaction of higher level wants of employ­ees. Entire organisation environment and climate is favourable for productivity and job satisfaction.

Independent, creative thinking is stimulated. Clear-cut accountability provides re­cognition for the specialist and the professional in terms of their achievement. In short, sound organisation is humanistic and people-oriented so that we have ample scope for develop­ment of human talents and creativity.

vii. Sound organisation has flexibility and also stability. It responds in time to the changes in the environment and thereby justifies its existence. It promotes effective leadership and thereby ensures good em­ployee morale. It develops voluntary co-operation and best motivation of employees. All these factors assure stability.

viii. Sound organisation often effective management of change continuously and gives premium to innovations.

In short, sound organisation provides following typical results:

i. It facilitates precise delegation.

ii. It provides ef­fective communication.

iii. It helps equitable distribution of work.

iv. It gives smooth management and administration.

v. It is more than a chart—it is the best mechanism for mana­gerial leadership, co-ordination and control.

vi. It ensures closer co-operation and higher employee morale.

vii. It enables smooth management and operation of the enterprise, thereby enhancing managerial efficiency, e.g. quick, disposal, minimum inter-department rivalry or friction, absence of divided respon­sibility, effective communications, etc.

viii. It ensures steady growth and diversification.

ix. It can secure the optimum use of human efforts through specialisation. Thus, human capital can be fully utilised.

x. It ensures, above all, accomplishment of objectives and strategies.

xi. It provides for the optimum use of technological improvement, e.g., automation and computerisation.

xii. It offers ample scope for the training and development of managers,” e.g. job rotation, job enlarge­ment, delegation, etc.

xiii. It encourages creativity, i.e. resource­fulness, independent thinking, initiative, spirit of innovation, etc. with the help of clear-cut accountability, recognition, ap­preciation of talents, etc.

xiv. It permits management to res­pond in time to the changes in the environmental influences and make necessary adjustment to satisfy the new demands of society.

Importance of Sound Organisational Structure – Helps in Optimum Utilisation of Technological Innovations, Helps in Administration, Easy Co-Ordination and a Few Others

Organisation is the mechanism which determines the relationship of various persons. With the help of a well-defined organisation management is able to perform the functions of direction, co-ordination and control. An ill-defined organisation plan will not enable the management to make an effective exhibition of its managerial talents to realise business goals.

Following are some of the advantages of a good organisation:

1. Helps in Optimum Utilisation of Technological Innovations:

The test of a good organisation is its success in adjusting to the new and changing situation. The technological improvements are taking place every time and management is required to make use of them to exist in competitive world. The organisation should be flexible to incorporate all new requirements.

The adjustment to new changes will require re-scheduling and re-adjustment of duties and responsibilities in the organisation. There may also be a need to delegate new powers for making best utilisation of technological changes.

2. Helps in Administration:

An organisation provides sound foundation for effective managerial control. Various managerial functions will be effectively performed with the help of an organisation. The functions like co-ordination and control require a proper division of various functions and their assignment to suitable persons.

An important function of planning will be effective only if there is an organisation to implement it. Best plans may fail if these are not executed properly. The assignment of responsibilities among various persons for earring out different functions will be essential for making the plans effective. There will be a need of proper authority to carry out the functions systematically and effectively.

A good organisation is an asset to the management. It helps in achieving organisation goals through the exercise of effective controls. Organisation provides a channel for better management.

3. Promotes Growth and Diversification:

Area and activities of a business grow if it has a well-knit organisation. There will be a need for employing more persons whenever expansion and diversification takes place. A flexible organisational structure will enable the employment of more persons without disturbing the working. Additional activities will not put any strain on the management.

4. Easy Co-Ordination:

Every enterprise has a number of departments and sections. These are assigned different duties for achieving business objectives. There is a need for coordinating the working of various segments. A good organisation will divide and sub-divide the activities in such a way that the activities of different segments become complementary. This will bring an automatic co-ordination in the business.

5. Training and Development of Personnel:

A good organisation offers an opportunity for the training and development of personnel. A clearly defined authority provides a scope for the use of talent. There will be a sufficient scope to try new ideas in improving the working of the organisation. The new entrants get sufficient training in their work.

They are attached to experienced persons who guide them on undertaking various jobs. The job training is much better and gives good results as compared to class room training. A well devised organisational system will provide a sufficient opportunity for the training of new trainees and development of existing staff.

6. Encourages Initiative:

A good organisational structure will provide sufficient scope for taking initiative. Persons are allowed to try new ideas for improving upon their work. The policies and procedures are laid down for the guidance of managerial personnel. But within these limits people are given freedom to show their talent.

The initiative and creativeness encouraged in the organisation will make it dynamic and responsive to the new situations. If persons are not encouraged to take new initiative then the management may not be able to cope with the changing business environment. A good organisation clearly defines the scope of work of every person and allows them to grow in that sphere.

7. Better Human Relations:

Human relations improve in a good organisational set up. An organisation consists of human beings and their satisfaction will help in improving human relations. A clearly defined work, authority, responsibility, accountability will enable individuals to work in a free atmosphere. Everybody will know his limitations and may try to remain in that sphere. This will give job satisfaction to employees.

Importance of Sound Organisational Structure – Facilitate Administration, Increase the Efficiency of Management, Adoption of New Technology and a Few Others

Organisation creates the relationship between top level executives and lower level staff members. The top level executives perform the functions, like planning, organising, staffing, directing, controlling the lower level people. The actual work is completed at lower level of the organisation. In this way, the organisation maintains the relationship with each other in an enterprise.

Importance # 1. Facilitate Administration:

Administration aims at earning the highest profit by utilising the available resources properly. There is a planning, policy making, direction and co-ordination in the administration level to achieve the objectives. Besides, the administration classifies the activities of the business department-wise and appoints the officers, assistants, supervisors, executives to facilitate the achievement of objectives.

There should be an effective administration to achieve the objectives of the business. Duplication of work, wrong planning, inefficient personal, lack of motivation, improper allocation of duties and responsibilities, absence of co-ordination, communication gap, and improper instructions are the ingredients of ineffective administration. This ineffective administration can be removed by having a sound organisation. Allen observes that “A properly designed and balanced organisation facilitates both management and operation of the enterprise. Inadequate organisation may not only discourage but also actually preclude effective administration”.

Importance # 2. Increases the Efficiency of Management:

Under good organisation, there is a chance of exhausting the worker’s ability in full and utilisation of resources effectively. Confusion, delay and duplication of work are avoided in good organisation. It automatically motivates the employees who are working in an organisation and increases the efficiency of management.

Importance # 3. Facilitates Growth and Diversification:

The structure of the company depends upon the structure of the organisation. The structure of the company can be changed whenever the growth and expansion activities are carried out. The growth of business means an increase in the scale of operation and diversification means starting of production of a new type of products. Changes in the organisation may result in the appointment of additional staff members, de-centralisation of authority and responsibility, raising of additional capital, identification of the consumer’s satisfaction and preferences, expansion of sales promotion activities and the like.

Importance # 4. Ensures Optimum Utilisation of Material Resources and Human Efforts:

Division of work and specialisation are the tools used to achieve the objective of optimum utilisation of material, resources and human efforts. Right man, right time and the right job can also be applied to them. Good organisation increases the efforts of the employees and the working facilities.

Importance # 5. Adoption of New Technology:

The effectiveness of an enterprise is measured by the reaction of staff members to the adopting of a new technology. In the scientific world, there is a lot of innovations and inventions identified in the area of production, distribution and personnel management. If the new technology is adopted by the enterprise, the maximum benefits can be obtained in any field or activity. A flexible organisational structure is needed to adopt a new technology.

Importance # 6. Places Proportionate Importance to the Various Activities of the Enterprise:

Organisation classifies the entire business activities into departments. Each department is receiving attention according to its importance it has in the achievement of business objectives. Money and efforts are spent in proportion to the contribution made by each and every department. It does not mean that less important department activities are neglected. It means that due importance is given to each department according to its contribution towards the achievement of the objectives.

Importance # 7. Encourages Creativity and Initiative:

A sound organisational structure will give an opportunity for the staff to show their hidden talents which will help the enterprise to achieve the business goals and earn higher profits. Clear distribution of authority and responsibility, incentives offered for specialised work and freedom given to personal work, increases the spirit of constructive and creative approach in management.

Importance # 8. Facilitates Co-Ordination:

The activities of different departments are grouped together to achieve the business objectives. Each department performs its own function in a closely related manner and not as competitors.

Importance # 9. Facilitates Training and Development of Managerial Personnel:

A sound organisational provides training to new staff members before placement and give refresher training to the existing staff members to improve their efficiency. The training may be given within the company or outside the company according to the training facilitates available. Now-a-days training institutes give training to the needy persons with the help of the different experts from various fields. These training institutes are collecting data directly from the field used in the training.

Importance # 10. Prevents the Growth of Secret, Influence and Corruption:

Sound organisation develops the morale, honesty, devotion to duty and loyalty of business organisations. Normally, these help remove corruption, secret and influence. Only an unsound organisation develops secret, influence and corruption.

Importance of Sound Organisational Structure

The need for organisation arises when two or more people work together. A one man business, will have no difficulty about coordinating the efforts of the buying, selling and other management functions of the business.

But once the business starts to grow and separate departments are created for buying, selling, accounting, administration and so on, the need for organisation undoubtedly grows with it. With the growing concepts and complexities of large scale business, the need and importance of organisation has grown substantially.

Organising makes possible the effective operations of a group. It is the basis for necessary team work among the various members of a common enterprise and helps in coordinating their efforts. In other words, the value of each individual’s contribution is enhanced and at the same time the accomplishments of the group are increased.

“Every member knows how he and his work fit in to the total picture, what he is to do when and where he is to do it and who helps him” The importance of organisation can also be judged from the fact that a good organisation is now regarded as the foundation of sound management. According to Allen, “A sound organisation can contribute greatly to the continuity and success of the enterprise”. It is a mechanism with the help of which management directs, co-ordinates and controls the business.

Efficient organisation offers the following benefits:

1. Proper division of work – Organising provides proper assessment of total work to be performed and its division among workable departmental units and individuals. Since total work cannot be performed by the manager alone, it must be divided among its staff in a well-planned manner.

This ensures that each person and department will contribute to his best capacity and skill, will feel definite and specific responsibility, will avoid duplications and overlaps and will improve the efficiency and speed of work. The person or department in the organisation will neither be overworked nor underworked. It thus ensures the optimum use of staff.

2. Optimum use of physical resources – Efficient organising provides for optimum and economical use of all physical resources such as buildings, machines, tools, materials, finance etc.

3. Avoids confusion and misunderstanding – By assigning definite duties and responsibilities, establishing definite superior-subordinate relationships, clear cut delegation of authority and by proper selection and training of the Staff, organisation brings definiteness and knits all its segments to operate together to realise its goals, Each of its departments or employees knows his specific mission, duty, authority and responsibility. Efficient organisation, thus, avoids all misunderstanding, confusions, conflicts, duplications and gaps.

4. Brings unity in direction, facilitates control and co-ordination – Efficient delegation and effective communication system, and well knitted relationships bring unity in command and direction, fixed responsibilities and division of work and facilitate control and co-ordination.

5. Increases management efficiency – Good organisation assures all round efficiency by bringing definiteness all around, matching jobs with individuals and individuals with jobs, by utilising best skills, experience, abilities and specialisation and by avoiding delays and wastages.

6. Efficient organisation prevents growth of laggards, intrigues, wire-pulling and other forms of corruption. Unsound organisation becomes breeding ground for dishonesty, lethargy and disloyalty.

7. Organisation provides scope to its employees for development. By providing training and practice on different jobs, and in different capacities, efficient organisation offers excellent scope to its employees for development. It gives them job satisfaction too.

8. It provides effective communication.

9. It gives smooth management and administration.

10. It is more than a chart-it is the best mechanism for managerial leadership, co-ordination and control.

11. It ensures close co-operation and higher employee morale.

12. It enables smooth management and operation of the enterprise, thereby, enhancing managerial efficiency, e.g. quick disposal, minimum inter- department rivalry or friction, absence of divided responsibility, effective communication etc.

13. It ensures steady growth and diversification.

14. It ensures, above all, accomplishment of objectives and strategies.

15. It provides for the optimum use of technological improvement, e.g. automation and computerisation.

16. It offer ample scope for the training and development of managers e.g. job rotation, job enlargement, delegation etc.

17. It encourages creativity, i.e. resourcefulness, independent thinking, initiative, spirit of innovating etc. with the help of clear-cut accountability, recognition, appreciation of talents etc.

18. It permits management to respond in time to the changes in the environmental influences and make necessary adjustments to satisfy new demands of the society.

19. Sound organisation has flexibility and also stability. It responds in time to the changes in the environment and thereby justifies its existence. It promotes effective leadership and thereby ensures good employee morale. It develops voluntary co-operation and best motivation of employees. All these factors assure stability.

20. Sound organisation offers effective management of changes continuously and gives premium to innovations.

Thus, the organisation climate is intangible. It cannot be seen. It is felt by people. It affects employee performance. It is a combination of many factors, such as management style, management values, the formal organisation (rules, policies, procedures, practices, organisational structure, reward system) informal organisation (norms of behaviour beliefs, values and attitude of the group) the communication system and all other managerial systems.

Good organisation improves interpersonal and intergroup behaviour to secure team work, i.e. rise in the level of mutual trust, support, openness and completeness of communication, widespread participation in planning and decision making.

Importance of Sound Organisational Structure

An organisation is a framework of various relationships amongst the individuals working in an organisation. It is the key to managerial success. A definite organisation structure leads to smooth running of all its operations.

Following are the advantages of a sound organisation structure:

1. Better administration and control – A sound organisation helps in achieving better managerial administration and control. It helps the management in several ways.

2. Ensure growth – A well-defined organisation structure will help an enterprise to grow and expand its operations. When more activities are added to an enterprise then only a sound organisation structure will be able to maintain the smooth running of the enterprise.

3. Optimum use of resources – A well-defined organisation will lead to optimum use of resources. These resources include both human as well as other physical resources like material, machinery, money etc.

4. Co-ordination – Co-ordination means bringing harmony in the efforts of various individuals.

“A well-defined and sound organisation makes sure that there is proper co-ordination between all the activities. This is done by dividing the activities in such a way that they become complimentary to each other.”

5. Co-operation – A sound organisation ensures proper co­operation amongst its employees. A good organisation helps in proper assignment of jobs, gives due credit to all the employees, reduces conflicts, chaos and duplication of work. It also helps in making communication easier and smoother.

6. Development of manpower – A sound organisation aims at continuous improving its human resources. This can be done through proper training and development programmes.

7. Encourages creativity and initiative – A sound organisation encourages creativity and initiative amongst its employees. A good organisation helps in encouraging people to try new ideas. In an environment in which an organisation is dynamic and constantly changing to cope with ever changing situations, it is very important to encourage the employees to take proper initiative.

8. Better Relationships – A sound organisation helps in building better relationship amongst its personnel, department, sections etc. with clearly defined jobs, authority and responsibility, resulting into reduction in conflicts and chaos in the organisation. A well-structured organisation also encourages co-ordination and co-operations amongst all the individuals in the organisation.

9. Use of better technology – A growth oriented organisation encourages the use of better technology. An organisation works in a dynamic environment and to cope with the changing business situation better technology is always helpful.

It helps in optimum use of equipment, machinery etc. It also encourages new and automatic techniques of production, control devices and data processing.

Importance of Sound Organisational Structure – Facilitates Effective Management, Co-Ordination of Activities, Encouraging Growth, Channel of Communication and a Few Others

Organisation is a mechanism which consists of formal organizational structure of role, relationship, position and authority. It facilitates the other functions of management. It is the foundation upon which the whole structure is built; which contribute to the success and survival of the enterprise. Organisation is also essential for the continuity and stability of the enterprise.

A sound organization facilitates in the following ways to achieve organisational objectively:

1. Facilitates Effective Management:

A properly-designed organization provides proper division of labor or departmentalization, consistent delegation of authority and clear authority relationships which facilitates smooth functioning of an organisation. A sound organization structure facilitates effective operation of the enterprise.

2. Co-Ordination of Activities:

Sound organisation helps in coordinating various jobs in the department or organisation. It develops cohesiveness in the enterprise. It integrates the various functioning of various departments. Organisation structure coordinates the activities of the organization properly.

3. Encouraging Growth:

A sound organisation structure helps in meeting challenges and creating opportunities for growth. A sound organisation structure facilitates growth by increasing its capacity to handle increased level of activity.

4. Channel of Communication:

Organisation structure provides the formal channel of communication which is necessary for smooth functioning of the organisation. Organisation structure establishes hierarchy in the organisation; which clearly make an outline of the information flow.

5. Departmentalization:

Management creates and forms various groups of closely- related and similar activities; which is necessary for the functioning of the enterprise. Departments/units are formed on the basis of requirements of the enterprise.

6. Delegation of Authority:

Delegation of authority creates superior-subordinate relationship between various positions in the organisation. Balance should be maintained in authority and responsibility through organisation structure. Creation of organisational structure also necessitates delegation of authority among various managerial positions. Organisational structure encourages prompt decision-making and effective control through decentralization.

7. Proper Utilisation of Resources:

A sound organisation utilizes the human and other resource of the organisation properly. Proper organisation provides .satisfaction and various incentives to employees. Sound organisation uses the material resources by taking into consideration the various constraints.

8. Stimulating Creativity:

Sound organisation structure stimulates creative thinking and initiative amongst organisational members by providing well defined patterns of authority. A good organisation enhances capacity of individuals and enables them to take advantage of the skills and experiences.

9. Technological Innovations and Improvements:

A sound organization structure which is adaptable to changes can make the best possible use of latest technological innovation and improvements. An enterprise takes advantage of the technological advancements through sound organisational structure.

Thus, a sound organisation structure is the soul of the enterprise. It facilitates attainment of the objectives of the enterprise. It facilitates the optimum use of resources and new technological developments. It facilitates growth and diversification and stimulates creativity and innovation.

A sound organisation structure encourages better relations between the worker and the management, and increases employee satisfaction and decreases employee turnover. In short, existence of a good organization structure is essential for better management.