SS2 Commerce Lesson Note on Structure of Business

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TOPIC: STRUCTURE OF BUSINESS

CONTENT:

1. Organisational Set up
2. Authority
3. Responsibility
4. Span of control
5. Inter and intra-departmental communications

SUB- TOPIC: Organisational Set up

The organisational set-up of a business involves the allocation of responsibilities and functions to different components of an organisation and delegating authority to such position in order to ensure the smooth operation of the business so as to achieve the planned objectives. It can also be explained as an arrangement and interrelationship of various component part and positions of business.

Principles of Management

The principles of management were postulated or put forward by F. Taylor in 1911. These principles are:

1. Clarity of objectives: The aim and goals of any organisation the strategies and means of achieving them must be clearly stated. This will make the employees strive towards achieving the planned objectives.
2. Span of control: This is the number of subordinates under the direct supervision of a manager to ensure efficiency and effectiveness; the number of subordinates should be restricted to what is mentally possible for him/her to control. It should be kept as low as three to six.
3. Unit of Command: In this case, subordinates receive instructions from their boss only as dual command affect effectiveness.
4. Division of labour: The organisation will achieve efficiency if work is divided into the smallest possible units as specialisation increases productivity.
5. Authority and Responsibilities: Authority and responsibility should be properly stated and both should match each other, i.e. authority should be commensurate with responsibility for effective supervision.
6. Unit of Command: Workers engaged in the same kind of activities must have objectives in a single plan. This means that corporate interest must supersede the individual interest.
7. Scalar Chain: to ensure unity of direction, there must a hierarchy. There must be a vertical communication which runs from the top to the bottom and vice versa in an organisation. Formal communication must move up and down the line of authority, (i.e. vertical communication) whereby, there would be proper communication from the bottom to the top.
8. Discipline: In any organisation, discipline must be maintained in all departments. A disciplinary system with penalties judiciously applied by worthy superiors will definitely strengthen the organisation.
9. Espirit-de-corps: Management should foster the morale of its employees and build up a team spirit. Management should be guided by the popular slogan (united we stand, divided we fall).
10. Remuneration: The remuneration of employees should be fair and satisfactory to both employer and employee
11. Evaluation: This principle assists to determine or measure the contributions of every worker to the attainment of organisational objectives.

Organizational Chart

This is a diagrammatic representation of the relationship between the various organs of the organisation i.e. the structure of the organisation. It shows the line of authority or command or communication and responsibility.

Importance/uses of organizational chart

1. It shows the flow of line of authority and responsibilities.
2. It shows the various positions in an organisation.
3. The span of control will be shown within an organisation.
4. The whole structure of the organisation will be shown.
5. A chart shows the relationship between various organs of organisation.
6. The boundaries of each position holder will be shown.

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