Organisation or organization
Our working definition: a network of individuals, or agents, who share a common goal project or venture, who also share a set of values (culture / ethos), and agree to undertake on a set of actions (methodology), using a specific set of tools (infrastructure), and a specific set of rules governance. These individuals maintain relations with other individuals in other contexts that can be far removed from their specific context of activities.
Organizations are living systems.
We can distinguish between the agents and the organizational structure.
Alternative views and definitions
The term organization can be defined in a number of ways, such as a process, as a structure of relationship, as a group of persons, as a open dynamic system and so on. Structure and process are two complementary and strongly interrelated views of the organization. Organisation can be seen as a structured, on-going process that defines how to achieve pre-defined goals.
- An instrument for achieving organizational goals
- A process of fixing duties and responsibilities (i.e. roles) of agents in an enterprise so that shared goals are achieved
- A coordinating point among various agents for the attainment of enterprise goals
- Helps in efficient utilization of resources by dividing the duties of various agents (role allocation)
- The creation of relationship among persons and work so that it may be carried on in a better and efficient way
- The mechanism developed to unite the efforts of the people in order to realize the set objectives.
Generates a sense of purpose or goal, is driven, is a venture, an enterprise, projected in the future, something to be achieved. Identification/surfacing of rewards and benefits. Presence of planning for effective execution, defined roles, duties, tasks for every role, relationships between roles, and between roles and resources and processes, allocation of members to roles. Identification of authority and responsibility.
“... the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.” — Louis A. Allen
Process of Organization
In traditional organizations
- Step 1: Determination and classification of firm’s activities.
- Step 2: Grouping of the activities into workable departments.
- Step 3: Assignment of authority and responsibility on the departmental executives for undertaking the delegated tasks.
- Step 4: Developing relationship amidst superior and subordinate, within the unit or department.
- Step 5: Framing policies for proper coordination between the superior and subordnate and creating specific lines of supervision
- Step 1: Determination and classification of firm’s activities.
- Step 2: Grouping of the activities into roles.
- Step 3: Design of the role system and specification of the flow of agents to roles. Assignment of roles when necessary.
- Step 4: Surface relations between roles
- Step 5: Framing policies for proper coordination between roles, peer review.
See page on Organizational structure, and organizational architecture.
An OVN is an emergent organization, which means that its structure is evolving from its activities, within a context, and may change as its interactions with its environment changes.
If we consider organizations as living systems the structure doesn't complexity describe the organization, as the organization is not a machine, it doesn't run like a clock or like a car. The structure is a set of boundaries that constrain processes in a way to diminish the probability that the organization exhibits some undesired behavior. Within these boundaries the organization can evolve and its behavior, or future state, is not entirely determined by its structure.
Although some see the organization as structure, it must be noted that the organization is not entirely described by its structure, as it remains a complex and emergent entity, with behavior and future states that cannot be entirely predicted from its structure. The structure under-specifies the organization. Thus, the main goal in formalizing a structure (make it visible in a coherent and consistent way) is to be able to use this representation as a guide when it comes to organizing activities, in order to maximize organizational welfare and help individuals better achieve their goals.
The structure determines relationships among agents who are involved in processes (who perform organizational tasks and duties), and among agents and resources. Organizational tasks are clustered into roles, which are clustered into areas/domains of activity (equivalent to departments in traditional organizations). Example of general / procedural domains are: Process, Capacity, Deliverables, Dissemination. These fundamental domains are applied to other domains such as R&D, artistic work, communications, etc.
Through governance, structure also informs relations of authority-responsibility are also called vertical relations, involved in hierarchies. In OVNs authority is based on reputation, which has dimensions of demonstrated knowledge and experience, commitment, etc. Authority is understood in context, for a limited time, as no permanent authority exists in OVNs.
Relations between areas/domains of activity are called horizontal relations.
The structure also specifies division of work/labor and shows how different functions or activities are linked; to some extent it also shows the level of specialization of work activities. It also indicates the organization's authority structure and shows its reporting relationships. These are horizontal as well as vertical relations.
Functions of organization
Why we get together?
- Achieve more as groups of individuals.
- Purpose, individual fulfillment.
- Reduce cost of transactions, provision of resources.
See Ronald Coase's transactional theory of organizations: people form organizations to diminish their transaction costs. In other words, an organization can exist only if it offers an environment in which the transaction cost among agents is lower than in other settings. This is a very important idea in the OVN model, because it explains why open networks can exist. The reason is that digital technology has lowered the costs of transaction among individuals, even strangers (ex. blockchain / Bitcoin, a trustless network).
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