Understanding Business Structure


Understanding Business Structure

Another important aspect of organizing will occupy our attention in this page and that is business structure.

In the design of a business organization we noted in previous discussions that the aim is to create positions and levels. But in doing this, it is for a promise; and the purpose is that there must be some role in a position that twill contributes meaningful to the attainment of the pre-set objectives of the organization.

Consequently, if there are no roles to perform by somebody in an organization, that person has no business in being in that organization. But in creating positions and levels with the associated roles gives rise to an organization.

And the structure is important because it shows the duties that should be performed in order that the goals and objectives can be reached. The structure of an organization is basically of three layers. The first layer is the Board of Directors, the second layer is the office of the Managing Director and the third and last layer is what is commonly referred to as a complex layer consisting of the functional managers and their subordinates. One important point we should again re-emphasis is that we know these layers through the functions that they perform.

By the end of the going through this page, you should be able to understand the following  

1. The Board of Directors

2. The functions of the Board of Directors describe the office of the Managing

3. Know director discuss the complex layer and

4. Understand functions of the complex layer.

Board of Directors

This is the first layer of a typical business organization. Members of the board are drawn from the shareholders. The Managing Director, even though he is in charge of then day to day activities of the organization is also member of the board. The board provide leader and that is why whoever is going to be elected or appointed to the board must be a matured individual capable of contributing constructively to the leadership role of the board. But beyond leader guidance to an organization, there are still other functions of the board which must be performed.

These functions include the following:

1. Determination of Organizational Policy

It is the responsibility of the board to fashion out what should be the policy of an organization. The policy is important because it gives a guide to action. It provides the framework through which all other activities are carried. If this is not , there will be no unity of purpose as every member will be doing things accordingly to the ay he/she likes. Such action of course will create waste, apart from the confusion. It will result, because action demands the expenditure of organizational resources. But this expenditure can only be worth the while if it is for the purpose of carrying out the objectives of the organization in line with the policy framework. It is for this reason that the primary task of the bound is to work out what will be regarded as correct policy framework which the members will use to assess their activities. The corporate policy affects the entire organization. But the department and sections can also have their policies which must of course support the corporate policy and never contradicting it.

 2. Determination of Organization Objectives

The corporate objectives of the organization are also determined by the board, which also provides the guidelines for each department to set its objectives. Again, the departmental objectives should not conflict with the corporate objectives. If there is any contradiction, because the corporate objectives are superior to the departmental or any other objectives in the organization, the corporate objectives will be upheld. We have emphasized this point in earlier unit. Remember, we discussed hierarchy of objectives with the corporate objectives at the top, followed by the departmental objectives and so on.

We have discussed what a good business objectives are, the characteristics of objectives, typesof business objectives, importance of objectives to an organization and other issues relating to objectives. 

Read on: Management Objective and Management Skill 


3. Carrying out Appraisal on the Organization

The board has to regularly carry out particularly the economic appraisal of the organization. It is not just enough to firm corporate policy and providing guidelines for sub policies in respect of the departments, the policies must be implemented. The board will review at appropriate period that extent to which policies earlier formulated are being implemented. The board also reviews the projects that have been approved for implementation. The review and appraisal are important so as to find out the level of implementation, the firmly in the process of implementation to existing guidelines and finding out if there are problems associated with the implementation. Any problem detected is then investigated and remedial action taken. Detailed programmes concerning how the projects are being implemented need to be reviewed. All the 3ps (policy , projects and progammes) are therefore regularly appraised so as to ensure the economic viability of the organization.

4. Determination and Provision of Adequate funds

The board does two things here. The first is that they find out preciously the amount of money that is needed for the projects and programmes they have approved based on courses on the corporate or organizational policy.

Also, it is the responsibility of the board how the net profit will be distributed, that is, how much will be given to shareholders as dividends, how much will go into reserves to improve performance among other important decision. Again on the event of the organization borrowing money from the bank to finance its operation, it is the board that will give the go-ahead.

5. Providing Schemes of Control

It is only the policy, projects and programmes of an organization that the board controls. Even though the board does not manage the day to day activities of the organization, the members works out appropriate methods and guidelines through which a activities of employees are control to ensure that they work towards attaining organizational objectives. All these are reflected in the organizational manual.

5. Appointment of the Managing Director

The board also appoints the Managing Director who is also the Chief Executive Officer of the organization. In appointing the Chief Executive, they fix his salary plus other benefits associated with that position. In some organization, the Managing Director is not only a member of the Board of Directors but sometimes serves as the Chairman of the Board of Directors.


The Managing Director

The office of the Managing Director is the next layer. He occupies a dual office, as a member of the board; he shares in the duties of the board that is in the corporate responsibilities with the other board members. Also, by his special position as the Chief Executive Officer, he acts as a link between the board and the rest of the organizations. The duties of the Managing Director or the General Manager as he is sometimes called include the following:

1. He presents organizational objectives

This is one of the primary duties of the Managing Director. It is not the wish of members of the organization to be in the board; it is not allowed. That is why they have to be represented by their Managing Director. But they need to know the objectives(s) of the organization because that is why the organization is existing in the first place, and these objectives must be sold to them so that they can be committed to them and regard them as their own ”baby” . The person to do that is the Managing Director. It must be pointed out that at the initial stage of gathering data necessary for objective formulation by the board, the Managing Director encourages other members of the organization to make contributions which are corrected to the board by the Managing Director for consideration. The idea is to encourage other members of the establishment, though indirectly, to objective formulation. In the same manner, the Managing Director encourages members of the organization towards policy formulation.

2. The Managing Director issues appropriate instructions

It is the responsibility of the Managing Director to issue out the necessary directives that will set the organization to work. This is directing. But whatever director that issued must be clear and devoid of any word that is capable of double interaction. Of course, the directives can be oral or written or a combination of the two. There are still other forms of communication but these are the popular ones.

3. He maintains Co-ordination

The Managing Director ensures a high level of co-ordination. We will be discussing this management function in detail in the later stage of this course. But basically, co-ordination involves the linking logically of an organization’s activity with another activity so that the entire organization works as systems. Effective co-ordination among the activities of the organization’s members (employees) will create a high will to work.

4. He creates and sustains morale

In the process of directing and leading the other members of the organization. There should be high morale, that is, enthusiasm, vim, rigor and total commitment to the objectives of the organization. All these are achieved through team spirit, appropriate motivation such as good salaries and wages tied to productivity, recognition, challenging tasks to perform, promotion as and when, good pension scheme, awards and other motivation techniques.

The Operating Executives (complete layer)

This layer is a complex one and it consists of the functional managers (the financial, production marketing and personnel mangers) and the subordinates working under each of them. They perform a variety of tasks.

1. The Financial Department

They carry out costing financial accounting records budget and budgeting control among others.

2. The marketing Department

Here functions such as the following are performed. Market and marketing resources market information segmentation product valuation buying and selling pricing distribution etc

3. Production Department

The personnel Department performs:

- planning for and measuring production progress

- engineering

- methods and standards

- manufacturing, among others

This layer comprising of the executive structure report to the managing director through a line of see executives. 


The personnel department

Functions that are performed here include:

1. Recruitment

2. Selection or interview placement

3. Salaries and wages administration promotion

4. Training, among others


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