internal factors that impact business ease of starting your own business

Internal factors that impact businessEASE OF STARTING YOUR OWN BUSINESS

External factors that impact business

Principles of organization – Chapter 9 Henri Fayol

Max Weber

Henri Fayol – pg 264 Fayol’s 10 Principles

1. Unity of Command – Workers report to only one boss (manager).- Why is it important to have only one boss?

2. Hierarchy of authority – Workers should know to whom they report to.In extension, workers should know when they have

empowerment

Henri Fayol 3. Division of Labour – Responsibilities are divided into

areas of specializationList some “specialties”

4. Subordination of individual interests to the general interest – Workers are to think and act as a coordinated team. The goal of the team outweighs each individual’s interestsEx: Sports teams

Henri Fayol 5. Authority – Managers have the right to give orders and

the power to enforce obedience

6. Degree of centralization – Authority and decision making powers should vary by circumstancesEx: Large organization vs small organization

Henri Fayol 7. Clear communication channels – Workers should be ablt

to reach other in the firm quickly and easily

8. Order – Materials and people should be placed and maintained in the proper location

9. Equity – Managers should treat employees and peers with respect and justice

10. Esprit de corps – A spirit of pride and loyalty should be created among people in the company

Max Weber – pg 265 A contemporary to Fayol. Came up with mostly the same

organizational theory

Promoted a pyramid shaped organization structure; great trust should be placed in managersThus, workers should just do as they are told

What is the problem with this?

Max Weber In addition, Weber also emphasized 4 things:

Job descriptionsWritten rules, guidelines and detailed recordsConsistent procedures, regulations and policiesStaffing and promotion based qualifications

Weber believed in Bureaucracy

Centralization vs. decentralization of authority

Centralized authority – decision making authority is maintained at the top level of management.Ex: at headquartersWhat does CA enable a company to do?

Formal vs Informal organization Formal organization – details lines of responsibility,

authority, and position

Informal organization – formed spontaneously when people/employees come together and form cliques

Advantages of informal organization Forges camaraderie and teamwork amongst workers Fosters creativity


Decentralized authority – decision making authority is given to lower-level managers and employeesWhat advantages could this have?

30 SECONDS TO THINK OF AN ANSWER15 SECONDS LEFTTIME IS UP

Adv and disadv of centralized authority

ONE MINUTE TO THINK OF AN ANSWER30 SECONDS LEFTTIME IS UP


Advantage Disadvantage

Centralized authority

Greater top management control

Less responsiveness to customers

More efficiency Less empowerment

Simpler distribution system

Interoganizational conflict

Consistent brand/corporate image

Lower morale away from headquarters


Adv and disadv of decentralized authority


Advantage DisadvantageDecentralized authority

Better adaptation to customer wants

Less efficiency

More empowerment of workers

Complex distribution system

Faster decision making Less top-management control

Higher morale Diverse corporate image

Span of Control The optimal number of subordinates a manager supervises

or should supervise

When work is standardized, one supervisor can manage many workersEx: assembly line workers

When work is less standardized, supervisors manage less workersWhy?

Bureaucracy When an organization has many layers of managers who

set rules and regulations

Workers are organized into groups, and each group has its manager

Workers are essentially being controlled by their managers

Weber comments that this is a “threat to individual freedoms”

Tall vs. Flat organization structures Tall (narrow) organization structures have many layers of

management where few people report to each manager

Flat (wide) organizational structures have few layers of management where many people report to each managerIn a flat organizational structure, workers are empowered

to make decisions

Adv and disadv of a tall organizational structure



Tall organizational structure

More control by top management

Less empowerment

More chances for advancement

Higher costs

Greater specialization Slower decision making

Closer supervision Less responsiveness to customers

Adv and disadv of a wide organizational structure



Wide organizational structure

Reduced costs Fewer chances for advancement

More responsiveness to customers

Overworked managers

Faster decision making Loss of control

More empowerment Less specific management expertise

Departmentalization Dividing a company up into separate units

Usually by function, skills, expertise, or resource use

Examples:1. A publishing company may have departments for

technical books, textbooks and novels.2. International firms may have divisions for each country

they operate in – Japan, China, Korea

Departmentalization

Advantages:Improves efficiencySaves costsProfessional development of employeesEasy for top management to direct and control activities

Departmentalization Disadvantages:

Departments may be isolated – lacking communicationEmployees may identify with department goals instead of

the company’s goalSlow response to external changesLess diverse skill base in employeesGroupthink tendencies

Organizational models Line organization – ‘Top down’ model, where orders come

from the boss, and employees follow ordersEffective if a business is small, ineffective when a

business is large… Why?They lack specialists and departmentalization to

handle diverse situations

Organizational models Line and staff organization – have line personnel who are

the primary workers and staff personnel who support the line personnel.

Staff personnel advise the line personnel and line personnel have the authority to enact change and decision making

Organizational models Matrix-style organization – Maintains the line and staff

organization, but is more flexible.

Managers can borrow people from different departments to help on projects

What are some advantages? Disadvantages?


Communication flow Chain of command – line of authority that moves from the top

of a hierarchy to the lowest levelWorker manager supervisor department head …

CEO

5 types of communication flowUpwardDownwardHorizontal/lateral DiagonalExternal

Communication flow 1. Upward flow of communication – Feedback is reported to

upper level management. Subordinates may report issues, concerns and performance reports to superiors.

Results in a more committed workforce, as workers voices and opinions are heard by their superiors

Methods: surveys, complaint and suggestion boxes, letters from employees

Communication flow 2. Downward – communication that comes from superiors

directly to subordinates.

Used to transmit work-related information to employeesGiving instructionsFeedback on performance

Methods: meetings, letters to employees

Communication flow 3. Lateral/Horizontal – communication between people at

the same levels of hierarchyManager to manager, employees to employees

Advantages: saves time, facilitates coordination and cooperation, provides mutual support

Communication flow 4. Diagonal – Communication between managers and

workers of different departments

Used for completing projects or complex tasks requiring assistance beyond a single department’s expertise

Communication flow External – communication between managers and external

groups/companies

HOW HAVE PEOPLE BEEN INNOVATIVE? Adapting to change, that’s how

What is adapting to change?

Restructuring Goal: to redesign on organization such that is can more

effectively and more efficiently serve its customers

Inverted organization – upper level employees (supervisors, managers) are expected to support lower level employees, not to direct and give ordersWhat are some possible advantages?Advantages: front-line workers are generally more

educated, customer satisfaction is high, better pay

internal factors that impact business ease of starting your own business

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