Most of our waking hours revolve around consuming products and creating activities. Awareness of our dependence on products such as food, transportation, and housing and on activities such as recreation and conversation can lead us to an understanding of the important role that organizations play in our daily lives. Indeed, it is difficult to think of a product or an activity that has not been influenced by some type of organization.
Food crops produced on farms or in gardens are made possible through the purchase of seeds, seedlings, tools, and equipment from nurseries and farm implement companies. Much of this food-is distributed by trucking organizations to various supermarkets. These trucking organizations use streets and highways built and maintained by political organizations such as city hall, state governments, and federal agencies. Supermarkets are housed in structures built by contractors who utilize crews of masons, carpenters, electricians, plumbers, and other skilled laborers.
Activities that tend to produce intangible goods, such as conversation or recreation, are also heavily influenced by organizations. We get together with friends to consume food and beverages distributed by food processors and bottling plants, while engaging in discussions of topics we've read about in newspapers and magazines issued by publishers. Likewise, we may go on vacations where organizations provide food, lodging, transportation, and entertainment.
Organizations are so deeply intertwined in our daily lives that we often fail to recognize the extent of their influence.
An important question, then, is, "Why do organizations envelop our lives to the extent that they do? Is it because humans do not have the capacity to be independent and self-sufficient?" One reason that organizations are so pronounced in our lives can be traced to Adam Smith's observation that two working together can produce more than two working alone. Smith referred to this as benefits obtained from the division of labor into specialized tasks to increase productivity. For example, in an English pin factory in the 18th century, Smith noted that 10 men specialized in their task could each produce about 4,800 pins a day. But if they were to have produced pins separately, one man working alone could not have produced more than 20 pins a day? Hence, organizations, by virtue of dividing labor into specialized tasks, serve as vehicles for increasing individual productivity.
We can define an organization as a collectivity of people engaged in a systematic effort to produce a good or an activity. Consider a chance meeting of three students in a student union. If we define a collectivity as two or more people, the group of friends in the student union will suffice. We can also note that an activity is being produced in the form of conversation which serves as an exchange of information about each other and perhaps other students. However, what is missing is a systematic effort to produce a good or an activity. By systematic we mean that the members of the collectivity have defined a set of coordinated roles in the "organization," are working toward a common goal (the desire to produce a good or an activity), and are doing so in a manner that enables some predictability of each other's activities. For instance, let us suppose that this same group of students decides to meet once a week in the student union for lunch to exchange information about each other's job search. One individual is assigned the responsibility for calling the other two to remind them of the meeting and to determine if they will make it that week. Another individual in the group is assigned the task of securing a table at the student union to guarantee that the group will not have to wait upon arrival. The third individual is assigned the duty of collecting money to pay for food. What has emerged from this process is a systematic effort to produce an activity; thus, the weekly meeting of three students that started as a chance encounter has evolved into a simple organization.
Certainly, this "organization" is not as formidable as General Motors, but it is an organization nonetheless. We may speculate that in time, new students join the group. Eventually the meeting is shifted to a hall at night in order to accommodate the number of people attending. We may also find the group engaging in multiple activities such as fund raising, organizing political events, and arranging social get-togethers. Officers may be elected and the organization may publish a brochure on job placement that is used to recruit more members to the organization. Ultimately, the members may even decide to produce a good or service, thereby leaving other jobs to take employment in this newly created company. Many organizations have gotten their start in this way.
An organization can take on many shapes and forms. It is important for us not to be mentally locked into the idea that organizations are of one type, such as large profit-oriented firms. In fact, large profit-oriented firms constitute only a small percentage of all organizations that currently operate in the United States. Most organizations are small and may be profit oriented or not-for-profit oriented. It is also important to recognize that while each organization may have unique characteristics, such as the product produced, the personnel hired, or the rewards distributed to management, organizations can be classified into broad "types" based on contextual characteristics that are commonly shared.
Organizations are multiple, influence much of our lives, and must contain two or more individuals engaged in a systematic effort to produce a good or an activity. In addition, organizations operate as a system influenced by both external and internal activities that managers must consider when engaged in planning, organizing and staffing, directing, and controlling.