BASIC STRUCTURE OF A BUSINESS ENTERPRISE

Why do we need to study Business Organization

Successful managers need not be products of study any
particular course of study like business administration,
education, engineering, the humanities, liberal arts, or law, they
must at least have a working knowledge and understanding of
the basic principles of business organization and management
more particularly the relationship between departments which
are vital in achieving the objectives of the entire organization.
Organization - the process of identifying and grouping the work
to be performed, defining and delegating responsibility and
authority, and establishing relationships for the purpose of
enabling people to work most effectively together in
accomplishing objectives.

What is Organizational Structure - is the framework by which

the activities of an enterprise, as determined by the managers
are performed.
= It is the arrangement of the functions performed by the
various personnel in the different units usually, classified into
division, departments, sections, and the rank and file workers.
Basic Requirements of Good Organization
To be effective, an organizational set-up must conform to
certain based requirements:
1) To define the basic objectives of the organization.
2) There must be a division of labour so that no member of

the organization will duplicate the work of another.

3)Directing authority to plan, coordinate, and control the

functions and activities of the enterprise.
Define line of responsibility and limits of authority can then be
established.
Directing Authority - it guides the work of the different
divisions as members of a well-integrated team.
4)To established the relationships among the members of
the business.
A pertinent questions on the organization are:
a) What is the relationship of employees to one another and
to
the whole organization?
b) Does each member of the organization know whom he
reports and who should report to him?
c) Does one employee report more than one superior?
The organization is divided into different levels of authority, each
with specific function and responsibilities, contributing to the
attainment of the organizations objectives.

Principles of Good Organization

The basic principles are essential to activities, coordination, and
harmonious relationship among the members of the organization.
The most important of these principles are:
1) Principles of departmentation or division of labor

Departmentation - refers to the particular groupings of functions

or activities in an organization, showing their relationships and the
people doing them.
The groupings establish the logical arrangement of the functions
and activities into levels in the organizational structures facilitating
the assignment of personnel according to their abilities and fields of
specialization.
The organizational structure as indicated by divisions,
departmentations and it breaks up the work into manageable units.

The organizational structure is necessary because of the limitations

of both human ability, time and specialization.
Levels of Management:
a) Top Management - group in large firm consists of the
executives, and managers which authority and responsibility
covers the entire company.
In a corporation, this group includes:
a) board of directors representing the stockholders
b) the president
c) the secretary
d) the treasurer
e) the general manager
The function of this group is to make the major plans and policies
for the company and to formulate the major decisions affecting
such matters as: finance, production, marketing and research.

It is also top managements responsibility to:

1) establish relations with stockholders, labor and customers
2) set up public and legal relations both internally and
externally
3) fix the responsibility and authority of each division and
department manager.
b) Operating Management - group includes personnel of
widely different ranks and responsibilities. This group includes
the: a) superintendent
b) the production manage
c) the personnel manager
d) the office manager
e) other department heads of equivalent ranks
The functions of this group is to interprets and carries out
policies, formulate plans, and utilizes management.
It
coordinates follows up and training subordinate

They are accountable to the chief executives of the firm;

c) Operating Supervision - a group is composed of the
members of the management who deal directly with the workers.
It includes the: a) supervisors
b) foremen
c) section chiefs
d) unit chiefs who are accountable to the operating
management
Also known as first line supervisors. The function of this
group, they have immediate control and supervision over the
work of the operating personnel. They:
a) direct and carry out the programs and goals of their
department or section;
b) analyzed department needs and train personnel under
them;

c) follow up and see to it that employee under them do their

work satisfactory.
d) Operating Personnel - are not part of management and are
the most numerous in the organization. Their task is to
accomplish the work assigned to them and to carry out the
decisions and policies made by the top and operating
management.
The rank and file employees and workers belong to this
group and they are at the bottom of the organizational
structure.
2) Principles of Unity of Command - when a member has
only one direct boss or supervisor. No employee can work
effectively for more than one immediate supervisors at the same
time because two superiors are liable to give their common
subordinates assignments which the latter cannot accomplish
simultaneously.

This principles date back to the time of Christ, who said: No

man can serve two masters; for either he will hate one and love
the other, or else he will be loyal to one and despise the other.
The principle should be applied in two ways:
a) each employee must know to whom he reports
b) a supervisor must know whom he directs
3) Span of Control or Span of Supervision - refers to the
number of subordinates who reports directly to a higher
executive. Because of limitations of the human capacity to
attend to and supervise different activities and workers, an
individual can adequately supervise only a certain number of
people. The larger the number of reporting to an executive
directly the less attention require3 to each subordinates.
4) Homogeneous Assignments - means that workers must be
assigned similar or related functions.

This principles limits the variety of jobs a person can successfully

accomplish. In delegating responsibility the functions to be
assigned should be grouped on the basis of similarity, that is the
duties should be sufficiently related to one another to take
advantage of specialization of skills and knowledge.
5)Delegation of Responsibility with Corresponding Limit of
Authority
Delegation - means conferring of a certain amount of authority
and responsibility from the superior to his subordinates.
= Is the process of decentralizing or distributing responsibility
and authority thus preventing bottlenecks and overwork for the
administrator at the tope of hierarchy.
In every organization someone must hold authority, responsibility
and accountability for the entire organization.

The Board of Directors - representing the financiers and

stockholders , hold this authority, responsibility, and
accountability in a corporation. The board elects presidents who
is then given then authority and full responsibility to manage
the enterprise.
The Presidents
divide the functions among divisions,
departments, sections, and units, applying the principles of
division of labor and specialization.
= He must employees people whom he can rely on and hold
responsible for handling the various functions.
Authority - is the right to act or to direct other to act.
= Has the right to decide what should be done and the right
to do it or to require someone each to do it for him.

The Organization Pyramid

Chief Executive Officer
Top Management
(President or Gen. Manager)
Senior Executives (Vice Pres.)
Operating Management
Division Heads (Asst. VP)
Department Managers
Operating Supervisor

Supervisors
Foreman

Operating Personnel

Workers

Levels of Management by which Authority is Distributed

Through the Organization (Organizational Structure)
Establish Objectives
Board of
Accountable to Stockholders
Directors

Operates business makes plans

and policies
Chef Executives
Accountable to Board of Directors
(President )

Coordinates activities of
Division or department
Accountable to CEO
Operating
Supervision

WORKERS

Operating
Management

Operating
Supervision

WORKERS

Operating
Supervision

WORKERS

4. Supervision and control of workers

Accountable to operating management
5. Execute and accomplishing assignments, carry out orders.
Accountable to operating supervisors and foreman
Broad Definition of Management
Is the process of planning, organizing, staffing, leading/directing, and
controlling the efforts of organizational members and the use of other
organizational resources in order to achieved stated organizational
goals.
Organizational resources: human resources
financial resources (money)
physical/technical resources

(man)
(machineries)

Organization - grouping of people/individuals working together with

common goals.