Organizational Structure in Small Business

Organizing the Small Business

• Organizing blends human and nonhuman resources through a formal structure.
• Its objective is to create a structure that defines roles and responsibilities.

The Appropriate Organizational Structure

• Each company must adapt a suitable organizational structure based on its needs.
• The size and objectives of the business will determine the organization's structure.
• Entrepreneurs can adopt any structure that suits their needs.

The Owner's Concern in the Organizational Structure

• Identify necessary activities to achieve organizational goals.
• Analyze the jobs to be performed.
• Place qualified individuals in specific roles based on their interests and skills.

Different Types of Organizational Structures

• Specialization: Work is divided into small, specialized tasks, and employees are assigned specific responsibilities.
• Departmentalization: Jobs are grouped into units, categorized by function, product, or territory.
• Delegation of Authority: Subordinates are assigned specific tasks with relevant authority.
• Span of Management: Refers to the number of subordinates reporting to a supervisor or the owner.
• Hierarchy of Objectives: Individual objectives contribute to achieving overall organizational goals.
• Degree of Centralization:
  • Centralized: Decision-making authority is concentrated in the hands of a few people.
  • Decentralized: Decision-making authority is widely delegated to subordinates.

Importance of Organizational Structure in Small Business

• Economic factors must be considered to determine if the structure provides benefits.

Directing the Small Business

• Directing focuses on the actual implementation of plans.
• Effective directing requires communication skills.
• Communication functions include:
  • Informing
  • Motivating
  • Controlling
  • Expressing emotions

Organizing the Small Business

• Organizing refers to how management uses human and non-human resources by creating a formal structure for tasks and authority.
• The goal of organizing is to produce an organizational structure defining job roles and reporting lines.

The Appropriate Organizational Structure

• Each business must adapt an appropriate organizational structure.
• The structure will depend on the number of people needed to achieve business goals.
• Businesses can start with various organizational structures as they grow and adapt.

The Owner's Concern in the Organizational Structure

• Identifying the activities needed to reach goals.
• Analyzing the jobs to be performed.
• Placing people with necessary skills and interest into relevant job roles.

Different Types of Organizational Structures

• Specialization: Dividing tasks into smaller, specialized roles with assigned employees.
• Departmentalization: Grouping jobs into working units based on functions like production, marketing or location.
• Delegation of Authority: Assigning specific tasks to subordinates with corresponding authority.
• Span of Management: The number of subordinates reporting to a supervisor, including the owner.
• Hierarchy of Objectives: Individual objectives are achieved to contribute to organizational objectives.
• Degree of Centralization: The level of authority for decision-making.
  • Centralized: Authority concentrated in one or few individuals.
  • Decentralized: Authority delegated to subordinates.

Importance of Organizational Structure in Small Business

• Businesses consider the economic benefits of one organizational structure compared to another to determine the most impactful and efficient model.

Directing the Small Business

• Directing is the actual implementation of the organizational plan.

Skills Required for Effective Directing

• Communication with subordinates:
  • Informs, motivates, controls and expresses emotions.

Organizing the Small Business

• Organizing involves combining human and non-human resources to create a structured framework for tasks and authority.
• The goal is to establish a clear organizational structure, outlining who performs specific tasks and who oversees them.

The Appropriate Organizational Structure

• Each business requires a tailored organizational structure.
• The necessary structure depends on the number of individuals required to achieve the company's goals.
• Entrepreneurs can choose to start with any organizational structure that suits their needs.

The Owner's Concern in the Organizational Structure

• Identify the activities essential for achieving the company's objectives.
• Analyze the jobs to be performed within the structure.
• Match individuals possessing the skills and interest to the respective job roles.

Different Types of Organizational Structures

• Specialization: Dividing the work into specialized, smaller tasks and assigning employees to specific tasks.
• Departmentalization: Grouping jobs into working units based on functions, products, or territories.
• Delegation of Authority: Assigning specific tasks to subordinates along with the commensurate authority to perform those tasks.

Different Types of Organizational Structures (Continued)

• Span of Management: The number of subordinates reporting to a supervisor or the business owner.
• Hierarchy of Objectives: Individual objectives should contribute to achieving the overall organizational goals.
• Degree of Centralization: The concentration of decision-making authority.
  • Centralized: Decision-making power is concentrated in the hands of a few individuals.
  • Decentralized: Decision-making authority is widely delegated to subordinates.

Importance of Organizational Structure in Small Business

• Economic considerations are crucial. The chosen structure should provide more benefits than alternative structures.

Directing the Small Business

• Directing involves implementing the plans and strategies developed during the organizing process.
• Effective directing requires specific skills:
  • Communicating with Subordinates: Informing, motivating, controlling, and conveying emotions.

This quiz explores the various aspects of organizing a small business, including human and nonhuman resources, roles, and responsibilities. It discusses how to adapt an organizational structure to suit the size and goals of the business. Understanding these fundamentals will empower entrepreneurs to effectively manage their companies.