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Unit 4 Company structure
Part 1
How are companies organized?
Assignment 1.Answer the questions:
• what kind of organization do you want to work for?
• in which department? (e.g. production, finance, accounting, marketing, sales, human resources)
• what will you be responsible for?
• do you think it will later be possible to change departments?
• what do you think your first position will be?
• do you expect to have one immediate boss, to work for more than one superior, or to be part of a team?
Assignment 2.These are some basic words used in relation to company organization. Match them up with the definitions on the right.
| 1 autonomous | A a system of authority with different levels, one above the other |
| 2decentralization | B a specific activity in a company, e.g. production, marketing, finance |
| 3 function | C independent, able to take decisions without consulting a higher authority |
| 4 hierarchy | D people working under someone else in a hierarchy |
| 5 line authority | E dividing an organization into decision-making units that are not centrally controlled |
| 6 report to | F the power to give instructions to people at the level below in the chain of command |
| 7 subordinates | G to be responsible to someone and to take instructions from him or her |
Assignment 3.Read the text below, about different ways of organizing companies, and then label the diagrams, according to which of these they illustrate:
line structure matrix structure functional structure staff position
COMPANY STRUCTURE
Most organizations have a hierarchical or pyramidal structure, with one person or a group of people at the top, and an increasing number of people below them at each successive level. There is a clear line or chain of command running down the pyramid. All the people in the organization know what decisions they are able to make, who their superior (or boss) is (to whom they report), and who their immediate subordinates are (to whom they can give instructions).
Some people in an organization have colleagues who help them: for example, there might be an Assistant to the Marketing Manager. This is known as a staff position: its holder has no line authority, and is not integrated into the chain of command, unlike, for example, the Assistant Marketing Manager, who is number two in the marketing department.
Yet the activities of most companies are too complicated to be organized in a single hierarchy. Shortly before the first world war, the French industrialist Henry Fayol organized his coal-mining business according to the functions that it had to carry out. He is generally credited with inventing functional organization. Today, most large manufacturing organizations have a functional structure, including (among others) production, finance, marketing, sales, and personnel or human resources departments. This means, for example, that the production and marketing departments cannot take financial decisions without consulting the finance department.
Functional organization is efficient, but there are two standard criticisms. Firstly, people are usually more concerned with the success of their department than that of the company, so there are permanent battles between, for example, finance and marketing, or marketing and production, which have incompatible goals. Secondly, separating functions is unlikely to encourage innovation.
Yet for a large organization manufacturing a range of products, having a single production department is generally inefficient. Consequently, most large companies are decentralized, following the model of Alfred Sloan, who divided General Motors into separate operating divisions in 1920. Each division had its own engineering, production and sales departments, made a different category of car (but with some overlap, to encourage internal competition), and was expected to make a profit.
Businesses that cannot be divided into autonomous divisions with their own markets can simulate decentralization, setting up divisions that deal with each other using internally determined transfer prices. Many banks, for example, have established commercial, corporate, private banking, international and investment divisions.
An inherent problem of hierarchies is that people at lower levels are unable to make important decisions, but have to pass on responsibility to their boss. One solution to this is matrix management, in which people report to more than one superior. For example, a product manager with an idea might be able to deal directly with managers responsible for a certain market segment and for a geographical region, as well as the managers responsible for the traditional functions of finance, sales and production. This is one way of keeping authority at lower levels, but it is not necessarily a very efficient one. Thomas Peters and Robert Waterman, in their well-known book In Search of Excellence, insist on the necessity of pushing authority and autonomy down the line, but they argue that one element - probably the product - must have priority; four-dimensional matrices are far too complex.
A further possibility is to have wholly autonomous, temporary groups or teams that are responsible for an entire project, and are split up as soon as it is successfully completed. Teams are often not very good for decision-making, and they run the risk of relational problems, unless they are small and have a lot of self-discipline. In fact they still require a definite leader, on whom their success probably depends.
Assignment 4.Which of the following three paragraphs most accurately summarizes the text, and why?
First summary:
Although most organizations are hierarchical, with a number of levels, and a line of command running from the top to the bottom, hierarchies should be avoided because they make decision-making slow and difficult. A solution to this problem is matrix management, which allows people from the traditional functional departments of production, finance, marketing, sales, etc. to work together in teams. Another solution is decentralization: the separation of the organization into competing autonomous divisions.
Second summary:
Most business organizations have a hierarchy consisting of several levels and a clear line of command. There may also be staff positions that are not integrated into the hierarchy. The organization might also be divided into functional departments, such as production, finance, marketing, sales and personnel. Larger organizations are often further divided into autonomous divisions, each with its own functional sections. More recent organizational systems include matrix management and teams, both of which combine people from different functions and keep decision-making at lower levels.
Third summary:
Most businesses are organized as hierarchies, with a clear chain of command: a boss who has subordinates, who in turn have their own subordinates, and so on. The hierarchy might be internally divided into functional departments. A company offering a large number of products or services might also be subdivided into autonomous divisions. Communication among divisions can be improved by the introduction of matrix management or teams.
Assignment 5.The text mentions the often incompatible goals of the finance, marketing and production (or operations) departments. Classify the following strategies according to which departments would probably favour them.
1a factory working at full capacity
2 a large advertising budget
3 a large sales force earning high commission
4 a standard product without optional features
5 a strong cash balance
6 a strong market share for new products
7 generous credit facilities for customers
8 high profit margins
9 large inventories to make sure that products are available
10 low research and development spending
11 machines that give the possibility of making various different products
12 self-financing (using retained earnings rather than borrowing)
Assignment 6.Match up the definitions with the terms in the previous assignment:
1) an amount ofgoods stored ready for sale
2) collective term for a company’s salespersons
3) producing as many goods as possible, or doing as much work as possible
4) profits generated by a company that are not distributed to shareholders as dividends but are either reinvested in the business or kept as a reserve for specific objectives (such as to pay off a debt or purchase a capital asset)
5) the money a company is willing to set aside to accomplish its marketing objectives
6) A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings.
7)A type of loan made in a business or corporate finance context.
8) The percentage of an industry or market's total sales that is earned by a particular company over a specified time period.
9)The ideal amount of cash that a company wishes to hold in reserve at any given point in time.
Part 2