ORGANIZING Review Legal Forms of Organization Proprietorship Partnership

ORGANIZING Review Legal Forms of Organization: Proprietorship, Partnership, Corporation, and Cooperative Organizing Process Comparison of subdivision logics (Departmentalization) Span of Control, nature of line, staff and service relationships Effect of technology on organization structure cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Proprietorship, Partnership, Corporation, and Cooperative Legal Forms of Organization Sole Proprietorship Owned and operated by one person Simple to organize and shut down Has few legal restrictions Owner is free to make all decisions Profit is taxed only once (in USA) Unlimited responsibility for debts Difficult to raise capital for growth of business Duration of business is limited to the life of proprietor cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Proprietorship, Partnership, Corporation, and Cooperative Legal Forms of Organization Partnership Association of two or more partners Has relatively few legal restrictions Permits the pooling the managerial skills and judgements Divided decision making and authority might cause problems Partners have unlimited liability for debts In a limited partnership, there must be at least one general partner Limited partners are limited only to the extent of their investment Most common form of business organization cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Proprietorship, Partnership, Corporation, and Cooperative Legal Forms of Organization Corporations Legal entities owned by shareholders Shareholder has no liability beyond loss of the value of stock Have perpetual life as long as submitting necessary reports Raising money for growth is easy Easiness in transfer of ownership and change management More difficult and expensive to organize Subject to many rules and regulations More taxing is applied Most large organizations are corporations cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Proprietorship, Partnership, Corporation, and Cooperative Legal Forms of Organization Cooperatives Special type of organization owned by users or customers Earnings are usually distributed tax free Board members managing cooperative are elected by all members cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Organizing To work efficiently in a team, members need to know the parts to play (roles) and how these roles relate to one another. Designing and maintaining these systems of roles is called organizing. cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Organizing involves 1. Identification and Classification of Required Activities 2. Grouping of Activities to Obtain Objectives 3. Assignment of a manager to each group with the authority 4. Provision for Coordination horizontally and vertically Top Level Middle-Level First-Line Managerial Level cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Organizing by Key Activities Effective organizing must first consider basic mission and long-range objectives established for the organization and the strategy. Therefore, key activities have to be considered first cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Organizing by Key Activities Ask three questions to identify key activities 1. In what area is excellence required to obtain the company’s objectives 2. In what areas would lack of performance endanger the results? 3. What are the values that are truly important to us in this company? cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Organizing by Key Activities After establishing key activities, two additional works are suggested: 1. Decision Analysis What decisions are needed to obtain effectiveness in key activities? (Futurity, effectiveness on the functions, frequency and results are addressed) 2. Relations Analysis With whom the person in charge of an activity will have to work? Find the crucial relations for success and effectiveness. These relations should be easy, accessible, and central to unit. cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Patterns of Departmentalization cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Patterns of Departmentalization Functional Departmentalization President Finance Manager cetinerg@itu. edu. tr Production Manager Sales Manager Designer Dr. B. G. Cetiner

ORGANIZING Patterns of Departmentalization President Finance Production CD Cabinet Div Acctg Prodn. Mktg Pers. Marketing Disk Box Div. Acctg Prodn. Product Departmentalization cetinerg@itu. edu. tr R&D Mktg Pers. Dr. B. G. Cetiner

ORGANIZING Patterns of Departmentalization President Finance Production Western Division Acctg Prodn. Mktg Pers. Marketing R&D Eastern Division Acctg Prodn. Mktg Geographic Departmentalization cetinerg@itu. edu. tr Pers. Dr. B. G. Cetiner

ORGANIZING Patterns of Departmentalization President Finance Production CD Cabinets Disk Boxes Parts Finishing Assembly Marketing Western Sales Eastern Sales Industry Sales Consumer Sales Mixed Departmentalization cetinerg@itu. edu. tr R&D Dr. B. G. Cetiner

ORGANIZING Span of Control Defines number of Subordinate Managers CEO M M wwww M M M wwww wwww Control of Span for 4 (needs 20 managers) cetinerg@itu. edu. tr M wwww Dr. B. G. Cetiner

ORGANIZING Span of Control Defines number of Subordinate Managers CEO M wwww M wwww M M wwww wwww Control of Span for 8 (needs 8 managers) cetinerg@itu. edu. tr M wwww Dr. B. G. Cetiner

ORGANIZING Span of Control CEO M M M M M wwww wwww wwww Narrow Span wwww CEO Wider Span M wwww M M M M wwww wwww wwww wwww Multiple Levels can increase communication and decision time Narrow spans of control (tall organizations) are expensive (we have more managers) Wide spans leave managers with inadequete times to supervise the activities. cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Factors Determining Effective Spans Number of relationships that exists between manager and subordinates individually and in various combinations, and among the suordinates themselves. Number of relationships with n subordinates [ n 2(n-1)+n-1 ] For n=1, 1 relationship n=2, 6 relationships n=3, 18 relationships cetinerg@itu. edu. tr

ORGANIZING Following Conditions affect a manager to effectively supervise people Subordinate Training Nature of jobs Supervised Rate of Change of Activities and Personnel Clarity of instruction and delegation Staff Assistance cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Current Trends in Spans To increase the spans of control (decreases number of organizational levels) Results of Wider Spans 1. Significant reduction of administrative costs 2. More effective and efficient organization communication 3. Faster Decisions and closer interaction between organizational levels 4. Requirement for more personnel training for all levels 5. Better leadership at all levels cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Classification of Companies 1. Unit: production according to the Customer orders (job-shop) 2. Mass Production 3. Process cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Impact of Information Revolution Reduction of number of workers, more skilled workers, requires monitoring abilities rather than physical one. Skills Required 1. Visualization (ability to manipulate mental patterns) 2. Conceptual Thinking (or abstract reasoning) 3. Understanding of processes such as machine fundamentals and machine/material interactions 4. Statistical understanding (trends, and meaning of data) 5. Oral and Visual Communication 6. Attentiveness 7. Individual Responsibility cetinerg@itu. edu. tr Dr. B. G. Cetiner

ORGANIZING Impact of Information Revolution RESULT Little future in industry for the uneducated employee cetinerg@itu. edu. tr Dr. B. G. Cetiner