the life every person is more or less connected with various
organizations; there is no organization without people, there no
people which are not connected with an organization. Here we will
speak about a business organization (a commercial enterprise),
exercising the function of managing production, distribution and sale
of goods and services for the buyers’ benefit and sellers’
profit. If a group of people wants to form of an organization, they
should consider the following conditions: a)
presence of at least two persons; b) presence of at least one general
goal; c) presence of a team of members who have intention to work
together in order to achieve this general goal.
organization is a system and its main characteristics include: a)
interrelationship between the organization and environment; b) labor
division (horizontal and vertical); c) management.
fact, an organization is the unity, which operates successfully, if
it is managed efficiently.
components of the success of any organizations are: efficiency,
economy and productivity.
succeed, any organization must change for the better all the time,
and it is the task of its management to lead their organizations to
the win. Actually, to succeed, a firm must be managed successfully.
The essential elements of any organization are as follows: a)
organizational structure; b) people; c) objectives; d) technology.
is known to be the framework of responsibilities, authority and
duties through which all the resources of an enterprise are brought
together and coordinated for the achievement of management
well-known model of an organization is like a tree, where the crown
of the tree is the embodiment of business units, the trunk represents
and the roots constitute core competence.
typical organization can be described in terms of;
organization is headed by; he/she reports to/ is under / is
accountable to/ is assisted by/ is supported by);
is responsible for/ is in charge of/ takes care of);
Board (Am) – Board of Directors (Br);
Vice-President of Finance (Am) –
Finance Director (Br)
Director (Am) – Sales Manager (Br).
(it is a parent company; it is a subsidiary);
line and staff; project and matrix structures, etc)
operate effectively, people must know their duties, responsibilities
and their authority, and that is the main reason why a company needs
its structure. There are companies with a simple organization
structure – with a single manager, ad there are companies with a
team of managers with a wide manager’s span of control, which
becomes richer with company’s growth.
span of control (span of responsibility) refers to the number of
subordinates who can be effectively supervised directly by one
manager, supervisor or other person in authority. The wider is the
span of control the better is the managerial activity, and the more
superior’s time is saved. It is the fact that the span of
management is the narrowest at the top and the widest at the bottom.
For example, Managing Director may have accountable to him just three
of four departmental executives whereas a foreman may be responsible
for the supervision of fifteen or more workers).
organization has its own life cycle, which includes the following
Growth, Maturity and Decline.
Like a human, a business organization goes in its activity through
its birth, growth, maturity and dying down.
TEXT 2. Forms, types and styles of
is the well-known fact that business can be privately owned in three
forms, the widely practiced are as follows: sole proprietorship,
partnership and corporation. Additionally, there are different
‘hybrids’ like franchise, limited partnership, joint venture and
kinds, forms, styles and structures of business organizations:
Organization by forms of business:
sole proprietorship; partnership; corporation
Kinds of business organization:
joint stock companies; holdings; limited partnership; franchises;
joint ventures; cooperatives.
Basic structures of business organization:
line structure; functional structure; line and staff organization
structure; departmentalization by product, territory or customer;
matrix organization structure.
Styles of business organization: bureaucratic;
contingency; just-in-time (JIT)
business organization exists only as long as it satisfies customers’
needs, either present or able to be created, and at a price
attractive to the market. The actual practice does not lead to the
most efficient form of a business organization, so proprietorships,
partnerships and corporations have their advantages and
disadvantages. They have structure, through which the activities of
personnel at all levels can be utilized in an orderly and controlled
manner to the benefit of the enterprise as a whole.
are the most numerous form of business organization. No charter and
permit are needed and there are no particular legal requirements for
organizing or conducting a sole proprietorship. When started, many
sole proprietorships are conducted out of the owner’s home, garage,
or van and inventory may be limited and may often be purchased on
1) easy to start; 2)flexible; 3) is owned by one person, which has a
total control; 4) profits belong to the owner.
limited resources;2) difficulties in raising capital, hiring
professionals and in management; personal responsibility and
financial liability are unlimited; 4) instability, great risk of
a partnership, two or more people share ownership of a single
business. Like in proprietorships, the law does not distinguish
between the business and its owners. The partners should have a legal
agreement that sets forth how decisions will be made, profits will be
shared, disputes will be resolved, how future partners can be bought
out, pr what steps will be taken to dissolve the partnership when
1) capabilities are expanded because of more than one owner; 2)
ability to share capital, experience, pressure and work; 3) financial
liability is limited; 4) the ability to raise funds may be increased;
5) prospective employees may be attracted to the business if given
the incentive to become a partner.
1) difficulties in supporting of uniformity in management; 2)
distinction in duties and profits are not easy to define (conflicts);
3) difficulties in getting loans from the banks; 4) partners are
jointly and individually liable for the actions of the other
partners; 5) profits must be shared with others; 6) partnerships may
have a limited life; it may end upon the withdrawal or death of a
Types of Partnership:
General partnership. Partners
divide responsibility for management and liability, as well as the
shares of profit or loss according to their internal agreement. Equal
shares are assumed unless there is a written agreement that states
‘Limited’ means that most of the partners have limited liability
(to the extent of their investment) as well as limited management
decisions, which generally encourages investors for short term
projects, or for investing in capital assets. This form of ownership
is not often used for operating retail or service businesses. Forming
a limited partnership is more complex and formal than that of a
Joint Venture acts like a general partnership, but it is formed for a
limited period of time or a single project. If the partners in a
joint venture repeat the activity, they will be recognized as a
continuing partnership and distribute accumulated partnership assets
upon dissolution of the entity.
A corporation is
chartered by state in which it has headquarters. It is considered by
law to be a unique entity, separate and apart from those who own it.
A corporation can be taxed; it can be sued; it can enter into
contractual agreements. The owners of a corporation are its
shareholders. The shareholders elect a board of directors to oversee
the major policies and decisions. The corporation has a life of its
own and does not dissolve when ownership changes.
limited financial liability; 2) ability to sell shares; 3) easy to
borrow from bank; 4) delegation of authority; 5) succession; 6)
synergy and high salaries. 7) corporations can raise additional funds
through the sale of stock
1) not easy to organize and ‘untwist’; 2) “double taxation”
(corporate tax); 3) strict legal regulation; 4) corporations are
monitored by federal, state and some local agencies, and may have
more paperwork to comply with regulations
is obvious that corporation is the dominant form of a large-scaled
business organization it terms of a present market. The number of
organizations has been growing constantly, and there is no reason why
growth should not continue indefinitely. In the context of an
organization the responsibility, authority and duty can be considered
as the basic obligations.
be defined as an obligation to make sure that authority is used in
the proper way and that duties are properly carried out as well. In
this sense, a chief executive takes full and ultimate responsibility
for the effective operating of the organization.
be stated as a power to assign duties to subordinates and to ensure
their carrying out. And definitely, the delegation of authority is an
important part of any job.
is the obligation to obey the orders and instructions. In most
organizations the number of orders and instructions grows with great
rapidity to meet changing requirements and circumstances.
organization is small it will be centralized: that is it will consist
of one unit, and responsibility and authority for all activities will
remain with a chief executive. With growth and development the unit
should be split into parts with a level of authority
(decentralization), or the larger the unit may be planned
(centralization). Some business organizations are highly centralized
with power concentrated in their head offices.
3. Organization structure
is necessary to mention that the business of any organization is to
establish an organization structure.
business, the organization structure means the relationship between
positions and people, who hold these positions; it shows who reports
organization structure is often too broadened; it is difficult to
understand the subordination. While growing up, there is a tendency
to increase the number of levels of management, to ensure the
effective supervision in the organization. However, in recent years
many organizations have adopted ‘flatter’ organization structure
reducing the number of management levels.
organization structure is always of multiple levels. Generally, a
company is made up of three groups of people: shareholders;
any case, it is useful for top managers to answer the key questions
from time to time:
Is our organization structure clear and understandable?
Does it correspond to our business strategy?
Is our subordination clear and if so, to what level?
Are the sphere and span of control rational enough?
Do our managers’ responsibility levels correspond to their power
simplest and the oldest form of organization, line
represent a clear line of responsibility and authority of each level
and above and below each level, it works only for small firms.
next form is a
with various departments: finance, marketing, production, etc. It is
common for rather small firms, as well.
best-known form is the mixed one:
the line-functional form. The
major advantage of a line-functional structure is that it is simple
with different chain of command and easy to control; the functional
specialists are not involved in routine running of an organization,
this is the responsibility of line management. The most known
disadvantage constitute its unclear lines of authority: many
superiors over the workers and difficulties in speedy
decision-making. Moreover, the staff functional officers may try to
seize the whole power. This form works for large companies.
large-scaled companies use departmentalization by territory, product
example, the product lines organization structure is effective in
terms of a changing market. It is focused on the efficient decision
making inside and outside the organization.
the main types of structure used by most organizations are the
project and matrix ones.
is temporally organized for a concrete problem solving. The matrix
does not have a traditional hierarchy. The authorities move
vertically from top to bottom, and there is more freedom for the
staff to innovate and carry out competitive objectives. (Схема).
The matrix structure organizes the business into project groups lead
by project leaders, and ensures sufficient and strategic
for the styles,it
is usual to consider three main styles
the concept where formal procedures are strongly prescribed.
is aimed at ‘the law of situation’, its structure is fluid and
strongly influenced by the environment; its response to change is
opposite to the first organizational style.
staff to take a high responsibility for their work; it is focused on
tight relation with suppliers, on the high standard of a product
quality and on the interaction between supply and demand. This style
includes a process, through which products are delivered to
customers; they are precisely timed to meet demand. There are many
points of interaction between all these links.
Organization as the management object
organization and its personnel constitute the main objects of
management. There are two basic models of organization as management
Organization as the close
Organization as the
mechanic structure Organization as the working team
Organization as the open
Organization as the
complex hierarchy Organization as the public organization
Employees’ involvement in activities
is worth summing up: any organization is a corporate enterprise that
has a legal identity; it operates as one single unit, and all members
take part in its activities and management; additionally any
organization should be established on the basis of the expected
work-load. It is interesting to note that, according to Philip
Kotler, there are three types of organizations:
organizations, which make things happen;
organizations, which watch things happen;
organizations, which wonder things happen.
Text 4. Board of directors and
company’s board of directors helps management to develop business
plans, economic policy objectives, and business strategy. A board of
directors often selects the chief executive of the business, supports
him, reviews his performance, and may dismiss him.
regular meetings, the board helps ensure effective organizational
planning and sees that company resources are managed effectively. The
board of directors also sees that the company meets regulatory
requirements that apply to that business. The board of directors also
must assess overall performance of the corporation.
monitor a company’s financial performance and the success of its
products, services and strategy. Directors are expected to follow
developments that can affect business. They must set aside any
potential conflict between their personal or individual business
interests to support the well-being of the business which they serve.
most effective board of directors will be a group of professionals
who bring a breadth of skills, experience and diversity to a company.
As a company grows and changes, the governing board also will change
to meet changing needs and circumstances.
of Board of Directors are:
Select and appoint a chief executive; to review and evaluate his/her
performance; to offer administrative guidance and determine whether
to retain or dismiss him
2. Govern the
organization by broad policies and objectives.
3. Acquire sufficient
resources for the organization’s operation
Account to the public for the products and services of the
organization and expenditures of its funds.
Major responsibilities of Board of Directors:
1. Determine the
Organization’s Mission and Goal.
2. Select the
3. Support the
Executive and review his/her performance
4. Ensure effective
5. Ensure adequate
6. Manage resources
7. Determine and
monitor the organization’s products and services.
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