Organizational Structure PDF

ORGANIZATIONAL STRUCTURE “ The best organizational structure suitable to a new business organization really depends on the short and long term vision of the entrepreneur and one that suits its immediate goals.” -Dr. N. A. Orcullo Jr.  Intro...

ORGANIZATIONAL STRUCTURE “ The best organizational structure suitable to a new business organization really depends on the short and long term vision of the entrepreneur and one that suits its immediate goals.” -Dr. N. A. Orcullo Jr.  Introduction ▪Before projects can be effectively led, they need to be effectively organized. ▪Although leadership and management are certainly interrelated, the field of management science focuses on the scientific study of decision making.  Introduction ▪Organizing can be defined as the function of creating in advance of execution the basic conditions that are required for successful achievement of objectives.  Introduction The general goal of any organizational structure is to establish the proper relationship among: ▪The work to be done ▪The people doing the work ▪The workplace(s)  Organizational Design ▪The result of the allocation of authority and responsibility is the establishment of an organizational chart.  Organizational Design ▪The result of the allocation of authority and responsibility is the establishment of an organizational chart.  Organizational Design Elements for Proper Organizational Structure oWork Specialization: To what degree are projects subdivided into separate jobs? oDepartmentalization: On what basis jobs will be grouped? oChain of Command: To whom will individuals and groups report? oSpan of Control: Up to how many individuals can a manager efficiently direct? oCentralization vs Decentralization: Who will be the sole maker of decisions? oFormalization: To what degree will there be rules and regulations to direct employees and managers?  Organizational Design Basic forms of Organizational Chart: ❑ Line Organization ❑ Line and Staffing Organization ❑ Functional Organization ❑ Divisional Organization ❑ Project Organization ❑ Matrix Organization  Organizational Design Basic forms of Organizational Chart: ❑ Line Organization Simplest form of organization and is most common among small companies The authority is embedded in the hierarchical structure It clearly identifies authority, responsibility and accountability at each level.  Organizational Design Basic forms of Organizational Chart: ❑ Line Organization  Organizational Design Basic forms of Organizational Chart: ❑ Line and Staff Organization most common in our business economy and especially among large enterprises. General Staff: This group has a general background that is usually similar to executives and serves as assistants to top management. They are not specialists and generally have no authority or responsibility of their own. They may be known as special assistants, assistant managers or in a college setting as deputy chairpersons.  Organizational Design Basic forms of Organizational Chart: ❑ Line and Staff Organization most common in our business economy and especially among large enterprises. Specialized Staff: Unlike the general staff who generally assist only one line executive, the specialized staff provides expert staff advice and service to all employees on a company wide basis.  Organizational Design Basic forms of Organizational Chart: ❑ Line and Staff Organization most common in our business economy and especially among large enterprises. Its main disadvantages are the confusion and conflict that arises between line and staff, the high cost that is associated with hiring specialists and the tendency of staff personnel to build their own image and worth,  Organizational Design Basic forms of Organizational Chart: ❑ Line and Staff Organization  Organizational Design Basic forms of Organizational Chart: ❑ Functional Organization Also commonly called a bureaucratic organizational structure, the functional structure divides the company based on specialty. This is your traditional business with a sales department, marketing department, customer service department, etc.  Organizational Design Basic forms of Organizational Chart: ❑ Functional Organization The advantage of a functional structure is that individuals are dedicated to a single function. These clearly defined roles and expectations limit confusion. The downside is that it’s challenging to facilitate strong communication between different departments.  Organizational Design Basic forms of Organizational Chart: ❑ Functional Organization  Organizational Design Basic forms of Organizational Chart: ❑ Divisional Organization The divisional or departmental organization involves grouping of people or activities with similar characteristics into a single department or unit. Also known as self-contained structures, these departments operate as if these were small organizations under a large organizational umbrella, meeting divisional goals as prescribed by organizational policies and plans.  Organizational Design Basic forms of Organizational Chart: ❑ Divisional Organization The decisions are generally decentralized so that the departments guide their own activities. This facilitates communication, coordination and control, thus contributing to the organizational success. Also, because the units are independent and semi- autonomous, it provides satisfaction to the managers that in turn improves efficiency and effectiveness.  Organizational Design Basic forms of Organizational Chart: ❑ Divisional Organization ❖ Departmentalization by Product. In this case, the units are formed according to the type of product and it is more useful in multi-line corporations where product expansion and diversification, and manufacturing and marketing characteristics of the product are of primary concern. The general policies are decided upon by the top management within the philosophical guidelines of the organization.  Organizational Design Basic forms of Organizational Chart: ❑ Divisional Organization ❖ Departmentalization by Customers. This type of departmentalization is used by those organizations that deal differently with different types of customers. Thus, the customers are the key to the way the activities are grouped. Many banks have priority services for customers who deposit a given amount of money with the bank for a given period of time. Similarly, business customers get better attention in the banks than other individuals.  Organizational Design Basic forms of Organizational Chart: ❑ Divisional Organization ❖ Departmentalization by Area. If an organization serves different geographical areas, the division may be based upon geographical basis. Such divisions are specially useful for large scale enterprises that are geographically spread out such as banking, insurance, chain department stores or a product that is nationally distributed.  Organizational Design Basic forms of Organizational Chart: ❑ Divisional Organization ❖ Departmentalization by Time. Hospitals and other public utility companies such as telephone company that work around the clock are generally departmentalized on the basis of time shifts. For example, the telephone company may have a day shift, on evening shift and a night shift, and for each shift a different department may exist, even though they are all alike in terms of objectives.  Organizational Design Basic forms of Organizational Chart: ❑ Divisional Organization  Organizational Design Basic forms of Organizational Chart: ❑ Project Organization These are temporary organizational structures formed for specific projects for a specific period of time and once the goal is achieved, these are dismantled. For example, the goal of an organization may be to develop a new project. For this project, the specialists from different functional departments will be drawn to work together.  Organizational Design Basic forms of Organizational Chart: ❑ Project Organization These structures are very useful when: 1.The project is clearly defined in terms of objectives to be achieved and the target date for the completion of the project is set. An example would be the project of building a new airport. 2.The project is separate and unique and not a part of the daily work routine of the organization.  Organizational Design Basic forms of Organizational Chart: ❑ Project Organization These structures are very useful when: 3.There must be different types of activities that require skills and specialization and these must be coordinated to achieve the desired goal. 4.The project must be temporary in nature and not extend into other related projects  Organizational Design Basic forms of Organizational Chart: ❑ Matrix Organization A combination and interaction of project and functional structures and is suggested to overcome the problems associated with project and functional structures individually. The key features of a matrix structure are that the functional and project lines of authority are super-imposed with each other and are shared by both functional and project managers. LEGAL FORMS OF ORGANIZATION  LEGAL FORMS OF ORGANIZATION SOLE PROPRIETORSHIP Proprietorships are single-person ownerships. This person owns, operates, and makes all major decisions for the company. There may be many employees, but the only responsible person is the one proprietor. This is by far the simplest form of ownership. It can be started with no formal documents and ended with no formal documents. It is whatever the person wants it to be.  Advantages of Sole Proprietorship Ease of starting and ending the business Being your own boss Pride of ownership Retention of profit No special taxes Disadvantages of Sole Proprietorship Unlimited liability Limited financial resources Difficulty in management Overwhelming time commitment Few fringe benefits  Organizing a Sole Proprietorship ✓ Register the business name with the DTI ✓Pay the municipal licenses to the local government ✓ Apply for VAT or non- VAT number ✓Register with the BIR the books of account (simplified bookkeeping records or journals and ledger) and the business forms to be used (sales invoices, cash sales invoices, official receipts, etc)  LEGAL FORMS OF ORGANIZATION PARTNERSHIP An association of two or more persons who bind themselves to contribute money, property or industry to a common fund with the intention of dividing the profits among themselves. Procedure in Organizing A Partnership ✓ Register the business name with the DTI ✓Have the partnership agreement (articles of co-partnership) notarized. ✓Obtain a tax account number for the partnership from the BIR. ✓Have the partnership agreement (articles of (co-partnership) notarized and then registered with the SEC. Procedure in Organizing A Partnership ✓Obtain the municipal licenses from the local government. ✓Obtain the value added tax account number (VAT) or non-VAT, as the case may be. ✓Register books of accounts (journals and general ledger) and business forms to be used (sales invoice, official receipts, cash sales invoice, etc) with the BIR.  LEGAL FORMS OF ORGANIZATION CORPORATION A corporation is an artificial being created by operation of law having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence.  Advantages of Corporation ✓ More money for investment ✓ Limited liability ✓ Size ✓ Perpetual life ✓ Ease of ownership change ✓ Ease of drawing talented employees ✓ Separation of ownership from management  Disadvantages of Corporation ✓ Initial cost ✓ Paperwork ✓ Two tax returns ✓ Size ✓ Difficulty of termination ✓ Double taxation ✓ Possible conflict with board of directors