What an organisation is, and what managers do in it

What this chapter is for

This chapter answers the first question of the subject. What is an organisation, what is management, and what does a manager actually do inside an organisation? Every later chapter builds on these answers. Strategy, structure, human resources, finance, operations and marketing are all things a manager does inside an organisation, so a reader who is clear about these two words reads the rest of the subject more easily.

The chapter moves from the organisation to the people who run it. It begins with what an organisation is and the kinds there are, then defines management and shows an organisation as a system that turns inputs into results. It then sets out the two tests of good management, efficiency and effectiveness, the levels and kinds of managers, and what research has found managers really do all day. It ends with two careful studies from South Asian factories, what management means for Pakistan, the critics, and where the field stands now.

The syllabus line this chapter answers, “Defining Organization, Management, and Management in Organizations”, has not yet been set as a Part-II question on its own. Its ideas run through nearly every answer in the paper, and Part-I questions test them.¹

Before you start

The words

Organisation. A group of people who work together, in a deliberate arrangement, to reach goals they could not reach alone. A firm, a ministry, a hospital and a cricket club are all organisations.

Management. The work of reaching an organisation’s goals by planning, organising, leading and controlling its people and other resources.

Manager. A person in an organisation who is responsible for the work of other people, and is answerable for the results.

Efficiency. Using as few resources as possible to get a job done. Efficiency is about cost: time, money, materials and effort.

Effectiveness. Reaching the result you set out to reach. Effectiveness is about the goal: choosing the right one and achieving it.

Resources. What an organisation uses to work: people, money, machines, materials, information and time.

Open system. A system that takes in inputs from its surroundings, changes them, and sends outputs back out, and so depends on its surroundings to survive. Every organisation is an open system.

Stakeholder. Anyone who affects an organisation or is affected by it: owners, employees, customers, suppliers, lenders, the government and the community around it.

Hierarchy. The ranking of positions in an organisation from the top to the bottom, each answering to the one above it.

Line and staff. Line managers are in charge of the organisation’s main work, such as making or selling. Staff managers support them with advice and services, such as legal, HR or accounts.

Piece rate. A way of paying workers a fixed amount for each piece they make, rather than for their time.

The places

Sialkot. A city in north-east Punjab, close to the Working Boundary with Jammu, known for making footballs, surgical instruments and sports goods for export. A famous study of how firms adopt new methods was carried out among its football makers.

Tarapur and Umbergaon. Two textile towns in the region around Mumbai, India’s commercial capital. Their cotton weaving firms were the setting for a famous experiment on whether better management raises output.

Faisalabad. Pakistan’s main textile city, in central Punjab. This chapter uses an imagined Faisalabad mill as its running example of an organisation.

The story in plain words

1. When people need to do something too big for one person, they work together, and once they arrange that work on purpose, they form an organisation.
2. Every organisation has three things: people who can talk to each other, people willing to put in effort, and a purpose they share.
3. Management is the work of making that arrangement reach its purpose. It means planning, organising, leading and controlling.
4. An organisation takes in people, money, machines and materials, turns them into goods or services, and sends them out to customers.
5. Good management is efficient, which means it wastes little, and effective, which means it reaches the right goal.
6. Managers sit at three levels: a few at the top set direction, more in the middle turn it into plans, and many at the bottom run the daily work.
7. Studies show that real managers spend their days talking, in short bursts, with constant interruptions, not sitting alone making grand plans.
8. Careful experiments in Indian and Pakistani factories show that management matters: better practices raised output, and badly designed pay stopped a useful new method from spreading.
9. In Pakistan only about one worker in forty-three is a manager, so the skill is scarce and valuable, which is one reason this paper exists.

1. What an organisation is

Picture a cotton mill on the edge of Faisalabad. It employs four hundred people. Some unload bales of raw cotton, some run the spinning machines, some check the yarn, some keep the accounts, some sell the yarn to weavers in Karachi, and one person, the owner, decides whether to buy new machines. No single person in the mill could spin a tonne of yarn a day and sell it. Together they do it every day. That mill is an organisation, and this chapter uses it as a running example.

The word has a precise meaning. An organisation is a group of people working together, in a deliberate arrangement, towards goals they share. Three ideas sit inside that sentence. The first is people. An organisation is not its buildings or its machines, which it could sell tomorrow and still exist. The second is a goal. The mill exists to make and sell yarn at a profit, and the people in it work towards that end. The third is deliberate arrangement. The work is divided up on purpose, jobs are defined, and someone decides who does what and who answers to whom. A crowd waiting at a bus stop has people and even a shared aim, getting home, but no deliberate arrangement, so it is not an organisation.

The American executive Chester Barnard gave the most quoted definition of an organisation in his book The Functions of the Executive in 1938. He defined a formal organisation as “a system of consciously coordinated activities or forces of two or more persons”. He then said what has to be present for one to exist: “The elements of an organization are therefore (1) communication; (2) willingness to serve; and (3) common purpose.”³ Barnard spent his career in business and rose to be president of the New Jersey Bell Telephone Company, and his three elements are practical.³ If the people in the Faisalabad mill cannot pass information to each other, if they will not put in effort, or if they do not share the aim of producing good yarn, the mill stops working as an organisation even though its doors are still open.

Barnard’s elements also explain why organisations fail. A firm whose departments do not talk to each other has a communication problem. A firm whose workers do the minimum has a problem of willingness, which later chapters treat as motivation. A firm that has lost sight of why it exists has lost its purpose, which the chapter on planning and goal setting treats. When a candidate is asked what makes an organisation, Barnard’s three elements, with a sentence on each, are a strong opening.

2. Kinds of organisation

Organisations differ in what they are for, who owns them and how formal they are. Knowing the kinds helps you place a case in the right frame.

Business firms exist to make a profit for their owners by selling goods or services. The Faisalabad mill is one, and so are Pakistan’s banks, telecom companies and shops. In Pakistan most firms of any size are registered as companies with the Securities and Exchange Commission of Pakistan (SECP), which keeps the national register. The Pakistan Economic Survey 2025-26 reports that 31,986 companies were registered in the nine months from July 2025 to March 2026, which “brought the figure of registered businesses to 294,101”.¹¹

Government organisations exist to carry out the state’s work: ministries, departments, regulators and the courts. They are funded mostly by taxes and judged by the public service they deliver, not by profit. State-owned enterprises sit between the two: they are owned by the government but sell goods or services, as Pakistan Railways and the electricity distribution companies do. The chapter on business and the state treats them in full.

Non-profit organisations exist to serve a cause and put any surplus back into that cause. Hospitals run as trusts, welfare foundations, schools run by charities and professional bodies are non-profits. They still need management, often more of it, because they must do a great deal with money given by donors.

Inside every formal organisation there is an informal one. The formal organisation is the one on paper, with its job titles, the organisation chart, the rules and the official lines of reporting. The informal organisation is the web of friendships, habits, groups and unwritten rules that grows up among the people. In the Faisalabad mill, the formal chart says the shift supervisor reports to the production manager. The informal organisation may say that everyone on the night shift takes their problems to an old spinner who has worked there for thirty years, because he knows how to fix anything and the supervisor does not.

Barnard saw that the formal organisation could not work without the informal one, and the chapter on the history of management thought shows how the Hawthorne studies of the 1920s and 1930s proved it. A good manager uses the informal organisation rather than fighting it. The old spinner, asked to train new workers, will spread good practice faster than any rule.

3. What management is

Every organisation needs someone to make sure that the arrangement of people actually reaches its goals. That work is management.

Management is the process of reaching an organisation’s goals efficiently and effectively by planning, organising, leading and controlling its resources. Another way to say it is that management steers how an organisation builds up, looks after and shares out its resources so that it reaches its goals, and managers are the people who design that process and see it through.⁴ Standard textbooks such as Daft’s and Robbins’s, both on FPSC’s reading list, use almost the same words.

Each part of the definition does work. “Process” means management is a continuing series of actions, not a single decision. “Goals” means management is always aimed at something; a manager who cannot say what the department is for cannot manage it. “Efficiently and effectively” sets the two tests, which the section on efficiency and effectiveness explains. “Resources” reminds you that a manager works through other people and other things, not alone.

The definition names four functions, which the next chapter treats in full. Planning means deciding what the organisation should achieve and how. Organising means dividing the work, grouping the jobs and assigning people and resources to them. Leading means guiding and motivating people to do the work. Controlling means checking results against the plan and correcting what has gone wrong. In the Faisalabad mill, the owner plans to raise output by a tenth next year, the production manager organises a third shift, the supervisors lead the new shift, and the accounts office controls by comparing each month’s output and cost with the plan.

The functions form a cycle, not a list. Control shows a shortfall, which leads to a new plan, which needs new organising, and so on round. The four functions are so closely bound that each feeds the next in a continuous loop.⁴

The syllabus line ends with “Management in Organizations”, and the words matter. Management is not a free-standing skill practised in the air. It is always done inside a particular organisation, with its own goals, people, history and surroundings. Managing a textile mill, a district hospital and a software house uses the same four functions, but the plans, the structures, the kind of leading and the measures of control are very different. That is why this chapter speaks of management in organisations, and why later chapters return again and again to the environment, culture and structure of the organisation in which a manager works.

4. How an organisation turns inputs into results

The clearest way to see what management does is to see the organisation as a system. A system is a set of parts that work together and take in things from outside, change them and send things back out. Organisations are open systems, because they depend at every moment on what lies around them.

Take the Faisalabad mill again and follow it through.

Inputs are what the organisation takes in from its surroundings. The mill takes in raw cotton from farmers and ginners, electricity and gas from the grid, workers from the local labour market, money from its owners and its bank, and machines from abroad.

The transformation process is what the organisation does to the inputs. The mill cleans the cotton, cards it, spins it into yarn and winds the yarn onto cones. This is where most of the people work, and where most of the management happens.

Outputs are what the organisation sends back out. The mill’s main output is yarn sold to weavers, but it also produces wages paid to workers, taxes paid to government, profit for its owners, and waste that must be disposed of.

Feedback is information about the outputs that comes back and changes the inputs or the process. A weaver complains that the yarn breaks too often; the mill tests its cotton more strictly. Sales fall because yarn from another mill is cheaper; the mill looks for ways to cut cost.

Around the system lies the environment, the people and forces outside the organisation that affect it. Farmers, banks, customers and competitors make up the mill’s immediate surroundings. Behind them stand wider forces, such as the price of cotton on world markets, the cost of electricity set by the regulator, the State Bank’s interest rate, which sets the cost of borrowing, the rupee’s value against the dollar, which sets the price of imported machines, and the government’s export policy. The chapter on the external environment teaches these in full.

The open-system view has one great lesson for a manager. An organisation cannot be managed by looking only inside it. A mill that runs its machines perfectly but buys cotton at the wrong time, or ignores a new competitor, can fail. Management therefore faces two ways at once. It looks inwards, to make the process work well, and outwards, to keep the organisation fitted to a changing environment.

5. Efficiency and effectiveness

Management is judged by two tests, and a candidate who confuses them loses an easy mark.

Efficiency means getting the work done with as few resources as possible. Put simply, efficiency asks how little was used to get the work done, while effectiveness asks whether the work achieved what it was meant to.⁴ A mill that spins a kilogram of yarn with less cotton waste, fewer hours of labour and less electricity than its rivals is efficient.

Effectiveness means reaching the goal, and choosing the right goal in the first place. A mill that makes exactly the yarn its customers want to buy, in the quantity they want, at the time they want it, is effective.

The two are different, and an organisation can have one without the other. Imagine four mills.

• Mill A makes coarse yarn very cheaply, but weavers now want fine yarn for export cloth, so it cannot sell what it makes. It is efficient but not effective.
• Mill B makes the fine yarn customers want, but wastes so much cotton and power that it loses money on every cone. It is effective but not efficient.
• Mill C makes the wrong yarn and wastes resources making it. It is neither, and will soon close.
• Mill D makes the right yarn at low cost. It is both, and that is the aim of management.

Of the two, effectiveness comes first. Being efficient at making something nobody wants is pointless. That is why the chapter on planning and the chapters on strategy come before the chapters on operations in this subject. Deciding the right thing to do comes before doing it well. Once the goal is right, efficiency decides whether the organisation can reach it at a cost that keeps it alive.

6. The levels of management

Not all managers do the same work. In any organisation of size, managers are arranged in levels, usually drawn as a pyramid with a few at the top and many at the bottom.

Top managers are the small group at the head of the organisation. In a company they are the chief executive officer, the directors and the heads of the main divisions; in a ministry, the federal secretary and additional secretaries. They set the organisation’s direction. They decide which businesses to be in, set long-term goals, approve major spending, and represent the organisation to the outside world, to the government, banks, investors and the press. Their plans look years ahead and cover the whole organisation. In the Faisalabad mill, the owner and his finance director are top management. They decide whether to add a weaving unit, borrow to buy machines, or start exporting.

Middle managers sit between the top and the front line. They are heads of departments, regional managers and plant managers. They turn top management’s broad aims into specific plans for their own parts of the organisation, allocate resources among the units below them, and pass information up and down. Their plans look months to a year ahead. The mill’s production manager and sales manager are middle managers. The owner says “raise output by a tenth”; the production manager works out that this needs a third shift, forty more workers and more maintenance.

First-line managers, also called supervisors, manage the people who do the organisation’s basic work. They include the shift supervisor, the foreman, the branch manager of a bank, the head nurse of a ward. They are the most numerous managers, and they spend most of their time directing and motivating workers day by day. Their plans cover today, this week and this month. Most of their day goes on showing and encouraging the people who actually make the goods or deliver the service.⁴

As a manager rises, three things change. The time horizon lengthens, from today’s shift at the bottom to the next five years at the top. The scope widens, from one team to the whole organisation and its environment. The skills needed shift too. Technical skill matters most at the bottom, where the supervisor must understand the spinning machines, and the skill of seeing the whole picture matters most at the top. The chapter on management roles and skills sets this out with Robert Katz’s three skills.

Many organisations have cut out layers of middle management since the 1990s to save cost and speed up decisions, giving flatter pyramids. The chapter on the building blocks of structure explains why, and what is lost when the middle disappears.

7. Kinds of managers

Managers also differ across the organisation, not only up and down it.

Functional managers are responsible for one function or specialist area: production, finance, marketing, human resources. They manage people who do similar work and usually rose through that work themselves. The mill’s chief accountant is a functional manager.

General managers are responsible for a whole unit that contains several functions, such as a plant, a division or a whole company. The general manager of a large group’s textile division is responsible for its production, sales, finance and people together, and must balance the claims of each.

Line managers run the work that is the organisation’s main purpose: in a mill, making and selling yarn. Staff managers run units that support the line with advice and services: legal, human resources, information technology. In practice the line decides and the staff advises, though staff units often hold real power over budgets and rules.

Project managers lead teams formed for a single task with a start and an end, such as installing a new spinning line or opening a branch. They often have no permanent staff of their own and must borrow people from functional managers. The chapter on projects teaches the tools they use.

In Pakistan, many family firms blend these roles. The owner is general manager, chief financial officer and head of sales at once, and the functional managers may be relatives. As a firm grows, the owner must hand functions to professional managers, and the strain of doing so is one of the common problems of Pakistani business, which the case of the Indian textile mills, later in this chapter, shows in a neighbouring country.

8. What managers actually do all day

The four functions describe what management is for. They do not describe a manager’s day. When researchers have watched managers at work, they have found something quite different from the picture of a calm planner at a desk.

Henry Mintzberg watched chief executives at work to see what they actually did with their time. In his words, the executives he studied “averaged 36 written and 16 verbal contacts each day, almost every one dealing with a distinct issue”, and “Half of these activities were completed in less than nine minutes”.⁶ John Kotter followed 15 successful general managers in nine corporations between 1976 and 1981. He found that a general manager “spends only 25% of his working time alone”, that “Few spend less than 70% of their time with others”, and that some spent up to 90 per cent. “It is not at all unusual for a general manager to cover ten unrelated topics in a five-minute conversation,” he wrote.⁷ Rosemary Stewart’s study pointed the same way. Over the four weeks she followed them, her managers had a clear half hour to themselves only nine times.⁵

The pattern is the same in every study. A manager’s work is fast, broken into short pieces, full of interruptions, and spent mostly talking and listening. Mintzberg put it sharply: “Unlike other workers, the manager does not leave the telephone or the meeting to get back to work. Rather, these contacts are his work.”⁶

These findings do not make the four functions wrong. They show how the functions are carried out. A manager plans in five-minute conversations as much as in formal meetings, organises by asking a colleague to take on a task in the corridor, leads by a word of praise on the shop floor, and controls by asking “how many cones today?” on the way past. The skill is to keep the purpose in mind through all the fragments, so that a hundred small actions add up to the plan.

For the Faisalabad mill’s production manager, a real day might begin with a call about a broken machine, move to a complaint from a weaver, an argument between two supervisors, a question from accounts about overtime, a visit from an electricity inspector and a quick talk with the owner about the third shift, all before lunch. That is management in an organisation. The chapter on management roles and skills turns Mintzberg’s findings into his ten roles.

9. Management at work in two South Asian industries

Does management really matter, or do firms succeed because of luck, cheap labour or the right connections? Two careful studies in South Asia, in industries close to Pakistan’s own, give some of the best evidence there is. Both used the method of a medical trial, giving help to a randomly chosen group of firms and comparing them with similar firms that got none, so their results can be trusted more than most.

Indian textile mills: better management raised output

From August 2008 to August 2010, a team of economists, Nicholas Bloom, Benn Eifert, Aprajit Mahajan, David McKenzie and John Roberts, ran an experiment among large cotton-weaving firms in Tarapur and Umbergaon, two textile towns in the region around Mumbai. The firms were much like Pakistan’s own textile mills. In every one, the managing director was the largest shareholder and all the directors were members of one family. They gave free management consulting to a randomly chosen group of plants and compared them with similar plants that received none. The consultants did not bring new machines or more money. They brought 38 basic practices in five areas. In factory operations, they had machines maintained regularly and the reasons for breakdowns recorded. In quality control, they had defects recorded by type and analysed every day. In inventory, yarn stocks were recorded daily against set levels and stored by type and colour. In human resources, they set job descriptions and incentive pay. In sales, production was tracked order by order.⁸

The results were large. Adopting these practices “raised average productivity by 11% through improved quality and efficiency and reduced inventory”. The practices also “increased decentralization of decision making, as better information flow enabled owners to delegate more decisions to middle managers”, and they increased the use of computers to collect and analyse data. The researchers asked why profitable practices had not already spread, and concluded that “informational barriers were a primary factor”: many firms simply did not know these practices existed or how much they would help, and weak competition let badly run firms survive.⁸

The study teaches three things this chapter has argued. Management is a resource that raises output, just as a machine does. It works through the four functions, here especially through control, by measuring defects and inventory. Its effect runs through people. Once owners had better information, they could trust middle managers with decisions instead of making every one themselves.

Sialkot’s football makers: pay that blocked a better method

The second study comes from Sialkot, where firms stitch footballs for export. The most common ball is made of 20 six-sided and 12 five-sided panels, cut from sheets of an artificial leather called rexine by pressing a metal die through the sheet. David Atkin, Azam Chaudhry, Shamyla Chaudry, Amit Khandelwal and Eric Verhoogen designed a new die that fits more five-sided panels onto each sheet. By their cautious estimate it cut the cost of rexine per panel by 6.76 per cent and a firm’s total costs by about one per cent. They gave the new die to a randomly chosen group of producers. It saved money for nearly every firm, yet after fifteen months few had taken it up.⁹

The researchers found the cause inside the firms. The cutters and printers who would use the new tool “are typically paid piece rates, with no incentive to reduce waste, and the new technology slows them down, at least initially”. Fearing that their earnings would fall, the employees resisted, in some cases by giving the owners wrong information about the tool. The researchers then tried a small fix. They offered one cutter and one printer in each firm a single payment, about a month’s earnings, if they showed they could use the tool in front of the owner. That payment, “small from the point of view of the firm, had a significant positive effect on adoption”.⁹

The Sialkot study is a lesson in management in organisations. The owner wanted to save material. The workers wanted to protect their pay. The pay system, designed long before, set the two against each other, and a good tool sat unused. A manager who saw the organisation as a system would have looked for exactly this, an input such as the pay system working against the output the firm wanted. The chapters on motivation and on incentives return to this case.

10. Why management matters in Pakistan

Pakistan has a large workforce and few managers. The Pakistan Bureau of Statistics’ Labour Force Survey 2024-25 counts 77.2 million employed people, measured by the international standard it now uses. Of them, 2.3 per cent work as managers.¹⁰ That is about 1.8 million managers, or roughly one worker in forty-three.

The same survey shows where the rest work. More than a quarter, 28.0 per cent, are skilled farm, forestry and fishery workers, 18.3 per cent are in elementary jobs that need little training, 17.2 per cent are service and sales workers, and 13.7 per cent are craft workers.¹⁰ Most of these people work in small firms, on farms or for themselves, where nobody holds the title of manager but someone must still plan, organise, lead and control.

These figures say something important for a future officer. Management skill is scarce in Pakistan, and the studies in the last section show that its absence costs output. Raising Pakistan’s productivity is partly a matter of machines, power and roads, which the state provides, and partly a matter of how well firms are managed, which training, competition and better information can improve. A candidate who can say this, with the numbers, is answering as the examiner hopes.

Management matters in government too. A deputy commissioner, a hospital’s medical superintendent and a secretary to a provincial department are managers. They plan, organise, lead and control, under rules and with public money rather than for profit. The four functions, the levels and the tests of efficiency and effectiveness apply to them as much as to the owner of a mill. That is one reason the CSS examination, which selects public officers, sets a paper on business administration at all.

11. The critics of the idea of management

The account above is the standard one, taught in every textbook. It has critics, and a strong answer knows their case.

Mintzberg’s study of what chief executives actually did was a direct attack on the classical picture of the manager as a planner, organiser, coordinator and controller. He called his famous article of 1975 “The Manager’s Job: Folklore and Fact”, and argued that the neat functions described what managers were supposed to do rather than what they did.⁶ The defence is the one given in the section on what managers do all day. The functions describe the purposes of the work, while Mintzberg described its form. Most textbooks now teach both, the functions as what management is for and the roles as how it is done.

The Dutch scholar Geert Hofstede argued in 1993, in an article called “Cultural Constraints in Management Theories”, that most of the management theories taught around the world grew out of the United States and carry American assumptions about the individual over the group, about equality between boss and subordinate, about short-term results.¹² In a country where people defer to seniority, where the family firm is the norm and where loyalty to a group matters more than individual achievement, those theories may not fit. A Pakistani manager who copies an American textbook’s advice on open-door management or individual performance pay may find it backfiring.

This criticism matters for Pakistan, and the chapter on organisational culture develops it with Hofstede’s own measures. It does not mean management theory is useless here. The two South Asian studies in this chapter show that basic practices, such as measuring defects or aligning pay with the firm’s goals, worked in South Asian firms. It means a manager must adapt the theory to the culture, not copy it.

A third group of critics, often called critical management studies, argues that the standard account treats management as a neutral technique when it is really about control, about getting more work from employees for the benefit of owners. On this view, efficiency for the owner may mean longer hours or lower pay for the worker. The answer to this criticism lies in the idea of stakeholders, which the chapter on ethics and social responsibility treats. Good management balances the claims of owners, workers, customers and the community, and an organisation that squeezes its workers often loses in the end through turnover, poor quality and conflict.

12. Where management stands now

The basic ideas of this chapter have held for nearly a century, but the organisations they describe are changing in four ways that matter for the examination.

Flatter structures. Many organisations have removed layers of middle management, so first-line and middle managers now supervise more people and take more decisions themselves. The Indian textile study showed the same thing at work: better information let owners hand decisions down.⁸

Information and data. Computers, mobile phones and software now let managers measure almost everything in real time. The mill owner can see each machine’s output on a phone. That makes control easier, but it also tempts managers to measure what is easy rather than what matters.

Artificial intelligence. AI tools now screen job applicants, forecast demand and answer customers. Some firms already use it to cut the time and cost of hiring.⁴ Managers must decide which judgments to hand to machines and which to keep, and they remain answerable for the results either way.

Organisations without walls. More work is done by people who are not employees: contractors, freelancers and suppliers, often in other cities or countries. Pakistan is part of this through its software exporters and freelancers working for foreign clients. Managing people you do not employ, through contracts and trust rather than authority, is a growing part of the job.

13. What students confuse about organisations and management

• Organisation and institution. In everyday Pakistani speech the two words are used for each other. In this subject, an organisation is a body of people arranged to reach goals, such as a firm or a ministry. An institution, in sociology, means an established pattern of behaviour, such as marriage or the market. Use “organisation” in this paper.
• Management and administration. Some older books say administration sets policy and management carries it out; others reverse it; Pakistani usage often calls government management “administration”. In this paper treat them as nearly the same, and if a question uses one word, use that word.
• Efficiency and effectiveness. Efficiency is doing a job with few resources; effectiveness is reaching the right goal. A candidate who uses them as synonyms loses the point of the distinction.
• Manager and leader. A manager holds a position and is responsible for results; a leader influences people, and may hold no position at all. A good manager leads, but not every leader manages. The chapter on leadership treats this fully.
• The organisation and the building. An organisation is its people working together. A firm that moves to a new office is the same organisation; a firm whose people all leave is not, whatever the sign on the door says.
• Functions and roles. The four functions (planning, organising, leading, controlling) are what management is for. Mintzberg’s roles are how managers spend their time. Do not mix the two lists.

14. What the examiners have asked

No Part-II question has yet asked, on its own, what an organisation or management is. The ideas of this chapter appear inside other questions. CE-2020 asked the candidate to “discuss that Management is evolutionary process”, which begins from a definition of management. CE-2019 asked for the significance of strategic management “for an organization”, and CE-2022 asked candidates to define “the organization’s culture”.¹ The Part-I questions of CE-2024 and CE-2025 test the ideas next to this chapter, such as the leadership grid, Theory Y, the disadvantages of a functional structure, what an essential element of effective decision-making is, and what contingency theory says.²

The syllabus line itself, “Defining Organization, Management, and Management in Organizations”, could be set as a twenty-mark question at any time, and its words tell you how. Define both terms, then explain how management works inside an organisation. The worked answer plan at the end of this chapter answers it in that form.

15. Facts to take into the examination hall

• Barnard’s definition (1938). A formal organisation is “a system of consciously coordinated activities or forces of two or more persons”; its three elements are “(1) communication; (2) willingness to serve; and (3) common purpose”.³
• Management. The process of reaching organisational goals efficiently and effectively through planning, organising, leading and controlling resources.⁴
• Efficiency and effectiveness. Efficiency is doing the work with the fewest resources; effectiveness is achieving the result the work was meant to achieve.⁴
• Three levels. Top (direction, years ahead), middle (plans for units, months ahead), first-line or supervisory (daily work, the most numerous).⁴
• Mintzberg. Chief executives averaged 36 written and 16 verbal contacts a day; half their activities took less than nine minutes. “The Manager’s Job: Folklore and Fact”, Harvard Business Review, 1975.⁶
• Kotter. General managers spent about 25 per cent of their time alone; few spent less than 70 per cent with others.⁷
• Indian textile experiment. Bloom and others, “Does Management Matter? Evidence from India”, NBER 2011, Quarterly Journal of Economics 2013: management consulting raised average productivity by 11 per cent.⁸
• Sialkot footballs. Atkin and others, NBER 2015, Quarterly Journal of Economics 2017: piece-rate pay made cutters resist a waste-saving tool; a payment of about a month’s earnings raised adoption.⁹
• Pakistan’s managers. 77.2 million employed in 2024-25; 2.3 per cent managers, about 1.8 million (PBS, Labour Force Survey 2024-25, 19th ICLS).¹⁰
• Pakistan’s companies. 294,101 registered with SECP; 31,986 registered in July 2025 to March 2026 (Pakistan Economic Survey 2025-26).¹¹
• Hofstede (1993). “Cultural Constraints in Management Theories”, Academy of Management Executive, vol. 7, no. 1: management theories are culture-bound.¹²

16. What loses marks on this topic

• A definition with no source. “Management is getting things done through people” is true but thin. Give the full definition with the four functions, and name Barnard for the organisation.
• The organisation described as a building or a legal entity alone. It is people working together on purpose; say so.
• Efficiency and effectiveness mixed up. Learn one example of each, and of an organisation that has one without the other.
• The four functions listed with no example. Each needs one sentence on what it means and one on what it looks like in a real organisation.
• The levels drawn without what each does. The pyramid alone earns little; add the time horizon and the kind of plan at each level.
• No Pakistani evidence. The PBS share of managers and the SECP register are quick facts that show you know the country you would serve.
• A purely American picture. Name Hofstede’s criticism and say that theory must be adapted to Pakistan’s culture.

17. A worked answer plan

The question

Define organization and management. Explain the role of management in organizations. (A question in the words of the syllabus line “Defining Organization, Management, and Management in Organizations”; no paper has yet set it on its own, 20 marks)

The tasks

There are three tasks. Define an organisation, define management, and explain what management does inside an organisation. The third carries most of the marks.

The headings

1. What an organisation is (Barnard’s definition and three elements).
2. What management is (the definition, efficiency and effectiveness).
3. The role of management: the four functions in an organisation.
4. Who manages: the three levels, and what each contributes.
5. What managers actually do (Mintzberg and Kotter).
6. Why it matters: the evidence, and Pakistan.

A sketch

The open-system diagram (inputs, transformation, outputs, feedback, environment), with “management” written across the transformation box and arrows to both the inside and the environment. A small pyramid of the three levels beside it.

A model introduction

An organisation is a group of people working together in a deliberate arrangement towards shared goals; in Chester Barnard’s classic definition, “a system of consciously coordinated activities or forces of two or more persons”, resting on communication, willingness to serve and a common purpose. Management is the process of achieving those goals efficiently and effectively by planning, organising, leading and controlling the organisation’s resources. Its role is to convert the separate efforts of many people into a single coordinated result, while keeping the organisation fitted to a changing environment.

The support, under each heading

Under the first heading, give Barnard’s three elements with one sentence each and a short example of an organisation, such as a textile mill, where each is visible. Under the second, give the definition and draw the distinction between efficiency and effectiveness, with the two-by-two of four mills. Under the third, take each function in turn and show it in the same mill. The owner plans, the production manager organises a new shift, the supervisors lead, the accounts office controls. Under the fourth, draw the pyramid and give each level’s time horizon and kind of plan. Under the fifth, report Mintzberg’s and Kotter’s findings in two or three sentences. Under the sixth, bring the evidence. The Indian textile experiment raised productivity by 11 per cent, the Sialkot study showed badly designed pay blocking a better method, and only 2.3 per cent of Pakistan’s workers are managers. Close the section with Hofstede’s warning that theory must be adapted to the local culture.

A model conclusion

Management is therefore the element that turns a collection of people and resources into an organisation that achieves its purpose. Its role is both internal, coordinating work so that it is done efficiently, and external, keeping the organisation pointed at the right goals as its environment changes. For Pakistan, where managerial skill is scarce and productivity low, better management in firms and in public bodies alike is among the cheapest sources of growth available.

What to remember from this chapter

• An organisation is people working together, in a deliberate arrangement, towards shared goals. Barnard (1938): “a system of consciously coordinated activities or forces of two or more persons”, with communication, willingness to serve and common purpose.
• Organisations are business, government or non-profit; each has a formal and an informal side.
• Management is reaching goals efficiently and effectively by planning, organising, leading and controlling resources; the functions form a cycle.
• An organisation is an open system: inputs, transformation, outputs and feedback, inside an environment.
• Efficiency is few resources; effectiveness is the right result. Effectiveness comes first.
• Three levels: top, middle and first-line, with time horizons from years to days.
• Managers are functional or general, line or staff, and some lead projects.
• Real managerial work is fast, fragmented and spoken (Mintzberg, Kotter, Stewart).
• Evidence: better practices raised Indian textile productivity by 11 per cent; piece-rate pay blocked a better tool in Sialkot.
• Pakistan: 2.3 per cent of 77.2 million workers are managers; 294,101 companies on SECP’s register.
• Critics: Mintzberg’s “folklore”, Hofstede’s culture-bound theory, and critical management studies.

Check yourself

Try each question from memory, in your own words, before you open the answer.

1. What three elements did Chester Barnard say every organisation needs, and what goes wrong when each is missing? (The section on what an organisation is)

2. A firm makes a product very cheaply, but customers no longer want it. Is it efficient, effective, both or neither? Explain. (The section on efficiency and effectiveness)

3. Draw the open-system model of an organisation and explain what feedback does in it. (The section on how an organisation turns inputs into results)

4. How does a manager’s work change from the first-line level to the top? (The section on the levels of management)

5. What did the Sialkot football study find, and what does it teach a manager? (The section on management at work in two South Asian industries)

6. Give one criticism of the standard picture of management and one reply to it. (The section on the critics)

7. From the chapter on how to sit the paper: what are the five steps of a numerical answer?