Before we get too deep into the study of organizational wisdom, let us first establish what organizations are.

An organization is a collection of people who collectively work towards a common purpose. Generally, organizations possess some form of hierarchy and division of labour–that is, it has some form of structure.

This structure may be formal, such as in a publicly-traded company where policies and procedures define who does what and how they do it. Alternatively, the structure might be informal, such as a student-team you join as part of a group project for a course where you agree amongst yourselves who does what and how they do it.

Importantly, organizations are what we call “open systems.” An open system means the organization has an effect on and is affected by the outside world.^[1]

The group’s structure (i.e., its hierarchy and division of labour) separates an organization from, say, a group of friends hanging out. Thus, a sports team, with coaches, team captains, and players who play specific positions, is an organization. You and your buddies watching movies on Friday night lack a hierarchy and division of labour and thus are not an organization.

Organizations come in many sizes, ranging from small teams with just a couple of members to massive corporations with thousands of employees. Note, large organizations are often composed of many smaller sub-groups. For example, a single business may consist of several departments, such as accounting, manufacturing, marketing, and human resources.

Each of these departments will have their hierarchy and division of labour, and so are organizations in their own right. In such situations, the business would be the primary organization while the departments are sub-organizations. If those departments are large enough, they may have sub-organizations of their own.

The concepts in this textbook apply to any size and type of organization, though it will emphasize larger organizations that consist of several sub-organizations. When this textbook uses the word “group,” it is referring to sub-organizations. When it uses the word “organization,” it is referring to the primary organization.