Company Ownership, Management, and Corporate Governance
Ownership, Management, and Corporate Governance
1. Concepts
A Property Company (owner) is the individual or group that owns the company, contributes capital and resources, and holds legal responsibility.
Company Management (director): In small and medium-sized enterprises (SMEs), the owner often manages the company. In larger organizations, managers act on behalf of the owner, setting goals, making decisions, and overseeing employees. When an owner directly manages the company, they are called an Entrepreneur.
Corporate Governance: Owners establish control mechanisms to align the interests of managers with their own. This function monitors managers’ behavior to ensure the company’s long-term survival.
2. The Four Administrative Functions
1. Directing
Directing involves integrating different parts of the company and aligning it with its external environment.
Managerial Roles:
- Decision-Making: Entrepreneur (proactive), negotiator, resource allocator, manager.
- Interpersonal: Leader (relationship with subordinates), liaison (between peers), figurehead (representing the group).
- Informational: Monitor (collects information), disseminator (shares information internally), spokesperson (communicates externally).
These roles are not mutually exclusive; one person can hold multiple roles.
Management Levels:
- Senior Executives: Set overarching goals and monitor their achievement.
- Middle Managers: Liaise between senior management and supervisors, often responsible for specific units.
- Supervisors/First-Line Managers: Handle daily tasks and address immediate concerns.
Management Skills: Managers need a balance of conceptual, technical, and human skills. The ideal proportion of these skills varies across management levels.
2. Planning
Planning involves assessing overall business objectives and defining the actions needed to achieve them. It initiates the administrative process and precedes other functions.
Planning is deciding in advance what to achieve, how to achieve it, where, who is responsible, and when. A plan is a written document specifying the actions that will guide the company.
Plan Classifications:
- General/Functional: General plans address all business activities, while functional plans focus on specific areas.
- Timeframe: Short-term (1-2 years), medium-term (3-5 years), long-term (5+ years).
- Flexibility: Rigid plans suit stable environments, while flexible plans adapt to uncertainty.
Plans are specified through objectives, which are important goals directing organizational and individual activities. Objectives are hierarchical:
- Company Mission: The company’s aspiration, which can be general (philosophy) or specific (activities).
- General Objectives: Global, long-term goals aligned with the mission and environment.
- Operating Objectives: Concrete, short-term objectives assigned to specific units or individuals.
- Actions: Rules, guidelines, procedures, or recommendations ensuring the organization meets its objectives.
3. Controlling
Controlling involves keeping the company on track to achieve its objectives. The control process measures performance, compares actual results with desired outcomes, and proposes corrective actions for deviations.
4. Organizing
Organizing involves designing the appropriate organizational structure to achieve planned objectives.
An organizational chart outlines the company’s structure, reflecting information flows and responsibilities. It helps identify potential issues in function assignments and lines of authority.
Types of Organizational Structure:
- Linear/Functional
- Divisional
- Matrix
An effective organizational design aligns with the company’s strategy and environment.