Business Organization: Structure, Principles, and Types
A business organization combines human and material resources, structured to achieve a specific goal. It involves a combination of available productive factors structured to derive maximum benefit.
Principles of Organization
- Principle of Unity of Command: Every employee must know who their boss is, and each boss must know their subordinates.
- Setting Objectives: The organization must clearly and precisely define its objectives to maximize benefits.
- Division of Labor: Workers must be specialized; everyone must know their specific tasks.
- Control: Ensure the performance of all obligations.
- Simplicity: Remove any unnecessary activity to make the job easier.
- Accountability: Each person is responsible for their work.
- Aptitude: Each person should occupy the position for which they are best trained.
- Coordination: Perform all phases of work in an orderly manner without duplicating orders and tasks.
- Hierarchy: Knowing at all times who gives an order and who has to execute it.
Hierarchical or Linear Organization
Characterized by unity of command, authority comes from the highest levels and decreases.
Advantages:
- Clarity of command and responsibility for each person.
- Allows for effective discipline.
- Enables quick resolution of small problems.
Disadvantages:
- Lack of flexibility.
- Lack of coordination between different departments.
- Little possibility of specialization.
Functional Organization
Characterized by the specialization of activities within the company. Each person performs a single function and can receive orders from several bosses or superiors responsible for different business functions.
Advantages:
- Allows for specialization.
- Greater flexibility in decision-making.
- Heads have greater capacity to act on a particular topic.
Disadvantages:
- Unity of command is broken.
- Several chiefs rule over several employees.
- Responsibility is diluted.
- Incoordination is likely to occur.
Joint Organization
This type of organization tries to combine the authority and responsibility of a hierarchical organization with the expertise and flexibility of a functional organization, taking the best of each.
Advantages:
- Attempts to solve the drawbacks of the other two types of organization.
Disadvantages:
- More difficult to carry out.
- Problems may arise between managers and specialists.
- Technicians may question chiefs or vice versa.
Organizational Chart
An organizational chart is the graphic representation of a business organization, indicating the system of relations, functions, and responsibilities that exist within it.
In any organization, there are different levels. For their interpretation, one must consider:
- Each level is related to the responsibility and authority held within the organization.
- At lower levels, there is less authority and responsibility.
- The higher the level, the greater and more general the responsibility.