Business Organization: Structure, Types, and Departmentation
**TMA 4: Business Organization**
**Business Organization**
Business organization consists in establishing rules and principles to coordinate the available means in order to reach one or more objectives with minimum effort and cost.
**Types of Organization**
**Informal Organization**
This is formed by a group of employees who have relationships based on common interests, hobbies, concerns, etc. For the proper functioning of the organization, it is important that both the company and its human team are satisfied. Informal organizations are formed spontaneously, not to address threats, but as a means to achieve satisfaction.
**Formal Organization**
This is intentionally defined to structure the company. It involves identifying and classifying defects, grouping them into organizational units of authority, assigning responsibilities, and establishing communication and coordination channels. It can be classified as:
**Classic Structures**
- Hierarchical:
- Characteristics: It has a single line of authority. Authority is exercised over people, regardless of the activity performed. Specialization is not supported. It is based on the principle of unity of command.
- Requirements: Applicable only to companies with a small workforce. It has few levels of command. Managers have great capacity and constantly coordinate all activities.
- Functional:
- Objectives: To increase efficiency and productivity with minimum economic cost and effort.
- Characteristics: Authority is exercised over activities. The principle of unity of command disappears. It promotes intermediate management. It requires specialization of activities for coordination, implementation of systems and procedures, and communication channels. The appearance of advisors (staff) is necessary.
- Requirements: It is necessary to establish various functions and appoint responsible parties for their execution. It requires specialized managers for each department, area, or function, as well as specialized personnel for each task. It is necessary to create the organization throughout the company, with coordination, communication, and permanent control being fundamental.
- Mixed: Combines functional and hierarchical structures.
- Requirements: Clearly differentiate line functions (control) from staff functions (advisory). The company must have highly qualified managers and advisors on staff. Responsibilities and functions must be assumed to avoid staff disregarding the execution of plans.
**Modern Structures**
Projects, matrix, and networks.
**Departmentation**
The process of allocating roles and dividing labor into departments results in organizational units. It should be understood not only as the distribution of functions within a company but also as the company’s organizational system.
**Types of Departmentation**
A) Simple Numbers: Based on placing a certain number of people who perform the same tasks under the supervision of a superior.
B) By Time: Appears in companies where work is ongoing and shifts must be made, or the same tasks cannot be performed continuously.
C) By Function: The grouping of activities according to the various functions performed by the company. From the core functions, a second level emerges where the functions are broken down to reach the levels of task performance.
D) By Geographical Area: Arises when the company operates over wide geographical areas. It is desirable that certain activities are clustered in an area, to which a manager is assigned.
E) By Consumers: Group activities according to different types of customers.
F) By Process: Seeks savings through the integration of tasks based on production lines. It is based on the evolution of large companies with prior functional departmentalization.
G) By Products or Services: Create departments for each product or service offered.