Management Company Structure

Management. Company structure Massachusetts Institute of Technology (MIT) team was asked to explain what happened to industrial performance of the United States during the past 20 years and to suggest what could be done to improve the situation. This team studied the problem and concluded: 1. American organizations were not producing as well as they ought to produce or as well as they used to produce or as well as the organizations in other nations;

2. American organizations certainly need to produce well, but to do this, they must be managed well. The using the following principles can solve this problem: 1. The application of effective management principles, programs and techniques in organizations must become commonplace 2. Participative management. Quality assurance. Customer service programs. New technology implementation.

Employee stock-purchase. Just-in-time production systems. Rewards programs. Entrepreneur programs. All these management approaches must be managed. Management is the process undertaken by one or more individuals to coordinate the activities of others to achieve results not achievable by one individual acting alone. Peter Drucker (the well-known American business professor) believes that the work of management is

to make people productive. To regain the competitive edge in the international arena, society must have managerial competence. Drucker states: “Management, its competence, its integrity and its performance will be decisive both to the United States and to the free world in the decades ahead”. Another view o management is presented in the popular best-seller, In Search of Excellence, where Peters and Waterman emphasize mentorship, love for managing and working

with people; managers are excellent communicators and value shapers, lightning rods to get the job done. Learning about management is important for two reasons: 1. Our society depends on specialized institutions and organizations to provide the goods and services we desire. These organizations are guided and directed by the decisions of managers. They allocate society’s resources, have the authority and responsibility to build safe products etc…they

establish the condition under which people are provided jobs, incomes… 2. Individuals not trained as managers often find themselves in managerial position. Peter Drucker suggests that the work of a manager can be divided into planning (setting objectives), organizing, integrating (motivating and communicating), measuring and developing people. He has spelled out that managers do. In his opinion managers perform 5 basic operations:

1. First of all, managers (especially senior managers such as company chairman – and women – and directors) set objectives, and decide how their organization can achieve them. This involves developing strategies, plans and precise tactics, and allocating resources of people and money. For this task, they need analytical ability; 2. Secondly, managers organize. They analyse and classify th activities of the organization and the

relations among them. They divide the work into manageable activities and then into individual jobs. They select people to manage these units and perform the jobs. For this, they not only need analytical ability but also understanding of human beings; 3. Thirdly, managers practice the social skills of motivation and communication. They also have to communicate objectives to the people responsible for attaining them.

They have to make the people who are responsible for performing individual jobs form teams. They make decisions about pay and promotion. As well as organizing and supervising the work of their subordinates, they have to work with people in other areas and functions. To succeed in this task managers need social skills; 4. Fourthly, managers have to measure the performance of their staff, to see whether the objectives

set for the organization as a whole and for each individual member of it are being achieved. Measuring requires analytical ability. 5. Lastly, managers develop people – both their subordinates and themselves. They help to make people more productive, and to grow as human beings. They make them bigger and richer persons. Obviously, objectives occasionally have to be modified or changed. It is generally the job of a company’s top managers to consider the needs of the future, and

to take responsibility for innovation, without which any organization can only expect a limited life. Top managers also have to manage a business’s relations with customers, suppliers, distributors, bankers, investors, neighboring communities, public authorities, and so on, as well as deal with any major crises which arise. Top managers are appointed and supervised and analised (and dismissed) by a company’s board of directors). In Peter Drucker’s view successful managers are not necessarily people who are liked

or who get on well with others. They are people who command the respect of workers and who set high standards. Good managers need not to be geniuses but must bring character to the job. They are people of integrity who will look for that quality in others. No one has had more influence on managers in the 20th century than Frederic W. Taylor, an American engineer. He set a pattern for industrial work with many others have

followed, and although his approach to management has been criticized, his ideas are still of practical importance. Taylor founded the school of Scientific Management just before the 1914-18 war. He argued that work should be studied and analyses systematically. The operations required to perform a particular job could be identified, then arrange in a logical sequence. After this was done a worker’s productivity would increase, and so would his wages.

The new method was scientific. The way of doing a job would no longer be determined by guesswork and rule-of-thumb practices. Instead, management would work scientifically the method for producing the best results. If the worker followed the prescribed approach his output would increase. He wanted companies to adopt a new approach to their work, which would change their thinking completely. The new way was as follows: 1. Each operation of a job was studied and analised;

2. Using this information, management worked out the time and method for each job, and the type of equipment to be used; 3. Work was organized so that the worker’s only responsibility was to do the job in the prescribed manner; 4. Men with the right physical skills were selected and trained for the job. 5. Observing, analising, measuring, specifying th work method, organizing and choosing the right person for the job – these were the tasks of management. Taylor’s approach produced results!

He made a lasting contribution to management thinking. His main insight, that work can be systematically studied in order to improve working methods and productivity, was revolutionary. Also, he correctly emphasizes that detailed planning of jobs was necessary. The weakness of his approach was that it focused on the system of work rather than on the worker. With this system the worker becomes a tool in the hands of management.

It is assumed he will do the same boring, repetitive job hour after hour, day after day while maintaining a high level of productivity. Another criticism is that it leads to de-skilling- reducing the skills of workers. Because the tasks are simplified, workers become frustrated. And with educational standards rising among factory workers, dissatisfaction is likely to increase. Finally some people think that it is wrong to separate doing from planning.

The two tasks can and should be don by the same person. A worker will be more productive if he is engaged in such activities as planning, decision-making, controlling and organizing. For all these reasons, a reaction has set in against the ideas of Frederick W. Taylor. Although the tasks of manager can be analised and classified, management is not entirely scientific. It is a human skill. Business professors obviously believe that intuition and ‘instinct’

are not enough; there are management skills that have to be learnt. Drucker, for example, wrote over 20 years age that ‘Altogether this entire book is based on the proposition that the days of the “intuitive” manager are numbered, meaning that they were coming to an end. But some people will be unable to put management techniques into practice. Others will have lots of technique, but few good ideas.

Outstanding managers are rather rare. The 20th century emphasizes the transformation of management into science. Looter Gulic, a management theorist, states that management is becoming a science as it studies phenomena systematically, that is why it’s trying to understand why and how people work together in order to achieve some certain goals. On the other hand a lot of specialists highlight the idea that management is more an art than a science, for the reason that managers ought to have a good command

of it and should be talented. The foundation of any science is the possibility to measure the phenomena objectively. Some aspects of organizations can be described in terms of quantity, exactly measured and analyzed. For example determination the most efficient ways of full filment the technical tasks. The authors in the field of scientific management analyzed successfully the performance of such jobs. This resulted in that some people strictly believed that management could become a science.

Though this optimism had a limited life. The practicing executives have found out that it didn’t always worked to make a employee to do the job in the prescribed manner. People, as it was learnt, not as uncomplicated as mechanisms. Furthermore managers have to deal with not only particular workers but also with the groups. So many social factors act in a big group that it’s difficult to measure their size and importance.

The same thing can be said about numerous factors of environment, which affects the organization. So, in our viewpoint management is at least partly an art. Managers should be trained through their experience and accordingly set practice against theory. Though it doesn’t mean that the management theory is useless. It rather signifies that managers should acknowledge the shortsightedness of theory and scientific

research, and practice them where they are useful. The management theory shouldn’t be contemplated as the absolute truth, but as the tools, which help us to understand improvably complex world of the organization. Company structure Talking about company structure I’d start with the defining of what organizing function is.

As it meant by managers the organizing function is the process of breaking down the overall task into individual jobs along with delegating authority to do those jobs and then putting them back together in units, or departments, of an optimal size according to some consistent bases. Thus we can describe the organizing function as dividing tasks into jobs, delegating authority, determining appropriate bases for departmentalizing jobs and deciding the optimal number of jobs in a particular

department. Why was I speaking about this function you wonder? Nowadays I suppose in every efficiently-run company the activities of the various groups and the responsibilities of the individuals who work within them must be carefully defined in the organization structure. And I can give many reasons to improve this statement. First of all in the modern business world the process of management decision-making is very complex.

But there is a limit to the number of decisions that can be made by one person. This means that companies should limit the amount of responsibility given to individual employees. Also there is an argued question about the number of people one person can manage directly in an efficient way. Thus the purpose of organizing function is to achieve coordinated and therefore more effective effort through the company structure and authority relationships.

Starting with company structure I can define it as the relationship between positions and people who hold the positions. It’s very important because it provides an efficient work system as well as a system of communication. Organizational structure can be compared with the anatomy of a living organism, acting as a framework, skeleton of the company. And it aims at providing an efficient work system, a mean of communication and satisfaction for the company personnel.

Explaining the first point I can add that business must try to maximize the output of products and services which result from a given input or resources. This is possible only when company organization functions smoothly. Second point – providing means of communication – is obvious, because the success of a company depends on a steady flow of full and correct information. Therefore an appropriate communication system must

exist to ensure that the right information reaches the right people. Finally speaking about satisfaction for the company personnel as an aim of company structure, what I can say is that in a system what is suitably organized this should serve as the basis for job satisfaction. It ‘s rather hard to find the best suited company structure to the business. Throughout the history of management practice, managers have struggled with this complicated issue,

but they had to accept that there is no the best one for all the organizations; rather the appropriate structure varies from situation to situation. It’s obvious that the structure of any organization should be dynamic thing, adaptable to changing circumstances. And the challenge to management is to design the appropriate structure. Thus let’s go to the subject of different kinds of structures.

There are a lot of different types of companies according to the aims they were created for. They can be charity or commercial one, private or public, parent company or affiliate, or we can classify them according to ownership to cooperative, governmental, enterprises and so on. We can also distinguish between unlimited liability companies (such as sole trader and partnership) which imply that the personal assets of the owners can be taken to pay any business debts, and limited

liability organizations (Ltd. and Plc.) in which liability for business debts is limited to the amount of capital subscribed. There can be two types of structure in organizations, classified in another way: 1. Formal structure is one in which the relationship among organizational resources are outlined by management. An example of formal structure would be the combination of groups of people into department of management. Formal organization structure is represented graphically in an organization chart.

Traditionally, an organization chart is constructed in pyramid form with individuals toward the top of the pyramid having more authority and responsibilities than individuals toward the bottom. Organizational chart shows the interrelationships of positions within an organization in terms of authority and responsibility. Informal structure, on the other hand, is one in which the patterns of relationships among organizational resources develop informally because of the existence of organization members.

Grapevine is an informal communication networks in organization. As I have already said managers are trying to find the best organization structure and nowadays we can view several types of them set apart according to the chain of command and essence of them. and it’s obviously seen in the organization charts usually depicted somewhere in every company. By the way it’s seemed I should mention a couple of words about the meaning of the chain of command.

It’s the formal channel that determines authority, responsibility and communications; it’s hierarchy of jobs differentiated by authority. But let’s return to the subject. Historically line structure is the oldest type of organization structure. The main idea of it is direct vertical relationships between the positions and tasks of each level, and the positions and tasks above and bellow each level.

Most organizations have a hierarchical or pyramid structure, with one person or a group of people at the top, and an increasing number of people below them at each successive level. This is a clear line or chain of command running down the pyramid. All the people in the organization know what decisions they are able to make, who their superior is and who their immediate subordinates are. When a business grows in size and becomes more complex, there

is a need for specialists. In such case administrators may organize staff departments and add staff spesialists to do specific work. Thus the second type of company structure is staff one. These people are usually busy with services, they do not tied in with the company product. The activities structure is a form of the organization of the staff departments include an accounting, personnel, credit and advertising. The holder of staff position has no line authority, and is not integrated

into the chain of command, e.g. an Assistant to the Marketing manager. Yet the activities of most companies are too complicated to be organized in a single hierarchy. Shortly before the first world war the French industrialist Henry Fayol organized his coal-mining business according to the functions that it had to carry out. So the third structure, functional structure is a form of the organization based on functional performance;

organizational departments created to fulfill organizational functions such as marketing, finance, and personnel. In other words related activities are grouped together in the functional areas with which they are most clearly identified. This means that for example that the production and marketing departments cannot take financial decisions without consulting the finance department. This type of the organization has characteristics of both line and staff functions.

And the most distinguishing feature of this types is that staff managers may have line (functional) authority for their particular activities. For example an advertising manager having some ideas in an organization characterized by strict adherence to line and staff authority could only ask the sales people to perform his duty. But in functional structure the request could be an order. Functional structures are efficient, but the are three standard criticisms:

1) people are usually more concerned with the success of their departments that results in permanent battles between departments; 2) separating functions is unlikely to encourage innovations; 3) sometimes people have too many bosses. An inherent problem of hierarchies is that people at lower levels are unable to make important decisions, but to pass on responsibility to their bosses. One solution to this is matrix management, in which people report to more than one superior on the

same level. Matrix structure is a form of the organization that combines some aspects of both the functional and staff structure. Thus, complete line authority may exist horizontally as well as vertically. The personnel in the functional areas of marketing and production are under the authority of two bosses. Such a system creates problems not found in the more traditional organization structures, but the advantages of increased flexibility, as well as specialization and coordination are considered by many to be compensating

factors. Furthermore, when the system is properly implemented, conflicts are resolved before they get to the top. As for criticism Thomas Peters and Robert Waterman in their well-known book “In Search of Excellence” insist on the necessity of pushing authority an autonomy down the line, but they argue that one element – probably the product – must have priority; four-dimensional matrices are far too complex. Yet for a large organization manufacturing a range of

products, having a single production department is generally inefficient. Consequently most large companies are decentralized, following the model of Alfred Sloan, who divided General Motors into seperate operating divisions in 1920. Each division had its own engineering, production and sales departments, made a different category of car (but with some overlap to encourage internal competition) and was expected to make a profit.

Thus the last organizational structure is divisional, and it has two main variants: product (or brand) and geographical one. Using geographical structure the entire market of a company is devided into several regions and each region has a sales manager who reports to the general sales manager. Usually regions are also divided into districts where the salespeople are directly responsible to their respective district sales managers. The geographical structure reflects decentralization and pushes

authority and responsibility close to the scene of action. Such an arrangement provides for better relationships with customers in handling their problems and adjusting complaint. The essence of the product (or brand) structure is that the effort associated with the marketing of a particular product or group of products is coordinated and made the responsibility of a product manager. This form of organization is suggested when a multiproduct firm becomes so large

as to result in excessive dilution of management expertise with respect to the expanded number of products in the firm’s offerings. But despite the popularity of the product-manager system, there have been many problems associated with its use. It’s argued, for example, that many product managers have had little advertising experience and therefore have only a halfhearted interest in that function. As a result, the system has undergone numerous changes over the years, and it is not possible to illustrate

a universally accepted structure. A further possibility to make a company more efficient is to have wholly autonomous, temporary groups or teams that are responsible for an entire project, and are split up as soon as it is successfully completed. Teams are often not very good for decision-making, and they run the risk of relational problems, unless they are small and have a lot of self-discipline. In fact thy still require a definite leader, on whom their success probably depends.

The last point I’d like to cover is concerned with authority relationships. As I’ve said before the purpose of organization function is to achieve coordinated effort through the company structure and authority relationships. Thus, what concerns the work behavior of organization members, there are four variables: 1) responsibility; 2) authority; 3) accountability; and 4) delegation.

Responsibility is perhaps the most fundamental ingredient that channels the activity of individuals within the organization. Responsibility is the obligation to perform an assigned activity. Responsibility is a commitment that people take upon them to handle their jobs to the best of their abilities. A summary of an individual’s jobs activities within an organization is usually contained in a formal statement called a job description. A job description is simply a listing of specific activities

that must be performed by the holder of the position. Authority is the right to perform or command, it’s right to make a decision without approval by a higher-ranking manager. Authority not only allows its holder to act in certain designated way, but also allows its holder to directly influence the actions of others through orders that the holder issues. There are 3 types of organizational authorities: 1.

Line authority is the most fundamental type of authority within the organization. It reflects the existing superior-subordinate relationship, which involves the right of a superior to give orders to a subordinate; 2. Staff authority is the right to advise or assist those who possess line authority and other staff personnel. Staff authority exists to enable those responsible for improving the effectiveness of line personnel to perform their required tasks.

Line and staff personnel must work closely together to improve the efficiency and effectiveness of th organization; 3. Functional authority is the right to give orders within a segment of the organization in which this right is normally nonexistent. It is generally established to cover only specific task areas and is operational only for designated amounts in time. Accountability is a management philosophy whereby individuals are held liable or accountable for how

well they used their authority and lived up to their responsibility of performing predetermined activities. Delegation is the fourth and the last of the main variables that managers should consider in organizing the work behavior of organization members. Delegation is the process of assigning job duties and related authority to specific organization members. There are three steps of the delegation process: 1) to assign specific duties to the individuals; 2) to grant appropriate authority to the subordinate;

3) to create the obligation for the subordinate to perform the duties. The issue of delegating authority involves balancing the advantages and disadvantages of centralization and decentralization of authority and has implications for the creation of a chain of command and the use of staff personnel. Centralization implies that minimal amounts of job activities and authority have been delegated to subordinates by management.

It is an organization along a strictly hierarchical model; no delegation of authority is permitted. Centralization’s benefits of clear direction and facilitated planning are offset by its inflexibility as well as poor accountability since no subunit has independent authority to act. Decentralization means that significant amounts have been delegated. Essential decision-making and policy formulation done at several locations throughout an organization.

The objective is to give decision-making authority to those most directly responsible for the outcome of those decisions, with first-hand experience and knowledge about the issues involved. The advantage of decentralized authority is that first of all, it encourages managers to delevop their decision-making ability, it creates competitive climate and it motivates managers to contribute and perform. Under the decentralization managers are able to exercise more autonomy, and this freedom can

lead to managerial creativity and ingenuity, which contribute to the profitability of the organization. But decentralization has also some disadvantages. First of all it concirns the cost of training for managers, because mangers must often be retrained to make decisions oncemade at higher levels. A second problem is that decentralization requires more sophisticated planning and reporting methods. And the last problem concirns the process of ghanging

from centralized to decentralized authority. Such a change requires top managers to delegate a portion of their decision-making authority to middle – and first-level managers and very often they may be unwilling or unable to do it, because they view delegation as undermining thier power and influence in the organization. So to make the long story short, in any company the structure should be a dynamic thing, adaptable to changing circumstances. The structure should be organized and the assignments of authority and responsibility

made on the basis of activities and positions, not people. Spans of control should be carefully considered and the total structure should reflect coordination among its various divisions.