Choosing a Form of Business Ownership

Major Considerations for Organizing a Business?

- Job design - Departmentalization - Delegation - Span of management - Chain of command - Job specialization -The separation of activities into distinct tasks and the assignment of different tasks to different people

Alternatives to job specialization?

- Job rotation systematically shifts employees from one job to another - Job enlargement - Job enrichment

Reason for conflict between staff and line manager?

- Staff manager often have formal education - Staff managers are often younger and more ambitious. - Line manager might see staff manager as a threat. - Staff manager may get upset if their recommendations are not adopted.

Rationale for specialization?

- The "job" of the organization is too large for one person to accomplish - A worker learning only a specific, highly specialized task should be able to learn to do it efficiently - Workers do not lose time switching from one operation to another - Specialization makes it easier to design machinery to assist those who do the job - Specialization makes it easier to train new workers

Steps in the Delegation Process?

- The manager assigns responsibility - The subordinate is empowered to do the task - Ultimate accountability remains with the manager

When is culture change needed?

1) when a companies environment has changed 2) Industry becomes more competitive. 3) performance is mediocre 4) company is becoming larger.

Sole proprietorship?

A business that owned and operated by one person. The simplest form of ownership and easiest to start. Many large businesses started as small struggling sole proprietorships. The most popular form of business ownership.

What is an organizational chart?

A diagram that represents the positions and relationships within an organization

What is an organization?

A group of two or more people working together to achieve a common set of goals

Network structure. Strengths and weaknesses?

Administration is primary function and other functions are contracted out to other firms. Strengths - flexibility allows the organization to adjust quickly to change Weaknesses - difficulty controlling the quality or work done by others organizations - low morale and high turnover of hourly workers - vulnerability of relying on outside contractors.

Sole proprietorship - Advantages and disadvantages

Advantage - Easy to start and close - Pride of ownership - Retention of profits - No special taxes - You are your own boss Disadvantage - Unlimited liability (Personally responsible for all debts of the business) - Lack of continuity - lack of money - limited management skills - Difficulty in hiring employees

Advantages and disadvantages of partnership?

Advantages - Easy to start - availability of capital and credit - personal interest - combined skills and knowledge - retention of profits - no special taxes Disadvantage - Unlimited liability - Management disagreements - lack of continuity - frozen investments

Advantages and disadvantages of corporations?

Advantages - limited liability ( each owned is liable for the money they paid for their stock) - Ease of raising capital - ease of transfer of ownership - perpetual life - specialized management Disadvantage - difficulty and expense of formation - government regulations and lots of paperwork - conflict with the corporation - lack of secrecy

Joint venture

Agreement between two or more groups to form a business entity in order to achieve a specific goal or to operate for a specific period of time. (Walmart)

Corporations?

An artificial person made by law with most legal rights. They can start and operate a business, buy and sell property, borrow money, sue be sued, and enter binding contracts. corporations only exists on money.

Departmentalization?

Departmentalization is an aspect of organizational design that includes the subdivision of a business into units based on their function or other criteria.

Informal groups?

Formed by the members themselves to accomplish goals that may or may not be relevant to the organization. Can be powerful forces in organizations exerting positive as well as negative influences.

Types of partners?

General partner - A person who has full or shared responsibility for operating a business. - Liable for everything a business does. Limited partner - A person who contributes capital but has no management responsibilities or liabilities beyond the amount the invested in the partnership.

Tall organizations?

Have narrow spans of management and many levels Have higher administrative costs (more managers) May distort internal communications during passage of the communications through the multiple levels of organization

Flat organizations?

Have wider spans of management and fewer levels Require managers to perform more administrative tasks and to spend more time supervising subordinates

The grapevine?

Informal communication network within an organization that is completely separate from—and sometimes faster than—the organization's formal communication channels. May be accurate or distorted; managers should be aware and use appropriately

Types of corporate culture?

Network culture: trust and friendship among employees and strong commitment and informal environment. Mercenary culture: Passion, energy, sense of purpose, excitement. Intense and focused and want to win. Fragmented culture: Employees not friends. Employees are flexible, autonomic, and equal. Communal culture: Friendship, commitment, focus on performance, high energy. Lives revolve around product. Success is celebrated by everyone.

The Informal Organization?

Pattern of behavior and interaction that stems from personal rather than official relationships

Corporate ownership

Stock - shares of ownership of a corporation Stock holder - a person who owns a corporations stock Closed corporation - a corporation whose stock is owned by few people and is not sold to the general public. Open corporation - A corporation whose stock that can be bought by anyone and sole on security exchanges

Hierarchy of corporate structure?

Stockholders --(elect)--> board of directors--(Appoints)->Manager--(hire)--> employees

Syndicates

Temporary association of individuals or forms organized to perform a specific task that requires a large amount of capital. Most commonly used to underwrite large insurance policies, loans, and investments.

Line Structure?

The chain of command goes directly from person to person throughout the organization. Simplicity allows for quick decision making and direct accountability Most suitable for small organizations with lower volume of activities than medium or large organizations Utilizes the chain of command from a line structure in combination with the assistance of staff managers Utilizes the chain of command from a line structure in combination with the assistance of staff managers Line managers make decisions and give orders to subordinates

What is the chain of command?

The line of authority that extends from the highest to the lowest levels of the organization

The Span of Management?

The number of workers who report directly to one manager Wide span: Large number of subordinates to one manager Narrow span: Only a few subordinates to one manager

Partnership?

Voluntary association of two or more to act as co-owners of a business. Less common form of ownership than sole ownership or corporation. No limit of how many partners. Usually two. Partnerships are usually a pooling of special talents.

What is delegation? and the barriers?

assigning part of a manager's work and power to other workers: Steps in Delegation Barriers to Delegation Fear the work will not get done Fear the work will be done too well Inability to plan and assign work effectively

Cooperatives?

business, or other organization which is owned and run jointly by its members, who share the profits or benefits.

Corporate Culture?

is the pervasive values, beliefs and attitudes that characterize a company and guide its practices.

Matrix structure?

is the practice of managing individuals with more than one reporting line. Employee reports to both the project manager in charge of the team and to their superiors in their home-base functional department