ORGANIZING

Review
Legal Forms of Organization:
Proprietorship, Partnership, Corporation, and Cooperative
Organizing Process
Comparison of subdivision logics (Departmentalization)
Span of Control, nature of line, staff and service relationships
Effect of technology on organization structure

cetinerg@itu.edu.tr

Dr.B.G.Cetiner

ORGANIZING

Proprietorship, Partnership, Corporation, and Cooperative

Legal Forms of Organization

Sole Proprietorship
Owned and operated by one person
Simple to organize and shut down
Has few legal restrictions
Owner is free to make all decisions
Profit is taxed only once (in USA)
Unlimited responsibility for debts
Difficult to raise capital for growth of business
Duration of business is limited to the life of proprietor

cetinerg@itu.edu.tr

Dr.B.G.Cetiner

ORGANIZING

Proprietorship, Partnership, Corporation, and Cooperative

Legal Forms of Organization

Partnership
Association of two or more partners
Has relatively few legal restrictions
Permits the pooling the managerial skills and judgements
Divided decision making and authority might cause problems
Partners have unlimited liability for debts
In a limited partnership, there must be at least one general partner
Limited partners are limited only to the extent of their investment
Most common form of business organization

cetinerg@itu.edu.tr

Dr.B.G.Cetiner

ORGANIZING

Proprietorship, Partnership, Corporation, and Cooperative

Legal Forms of Organization

Corporations
Legal entities owned by shareholders
Shareholder has no liability beyond loss of the value of stock
Have perpetual life as long as submitting necessary reports
Raising money for growth is easy
Easiness in transfer of ownership and change management
More difficult and expensive to organize
Subject to many rules and regulations
More taxing is applied
Most large organizations are corporations

cetinerg@itu.edu.tr

Dr.B.G.Cetiner

ORGANIZING

Proprietorship, Partnership, Corporation, and Cooperative

Legal Forms of Organization

Cooperatives
Special type of organization owned by users or customers
Earnings are usually distributed tax free
Board members managing cooperative are elected by all members

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Dr.B.G.Cetiner

ORGANIZING

Organizing
To work efficiently in a team, members need to know the parts to play
(roles) and how these roles relate to one another.
Designing and maintaining these systems of roles is called organizing.

cetinerg@itu.edu.tr

Dr.B.G.Cetiner

ORGANIZING

Organizing
Organizing involves
1. Identification and Classification of Required Activities
2. Grouping of Activities to Obtain Objectives
3. Assignment of a manager to each group with the authority
4. Provision for Coordination horizontally and vertically

Top Level
Middle-Level
First-Line Managerial Level

cetinerg@itu.edu.tr

Dr.B.G.Cetiner

ORGANIZING

Organizing by Key Activities

Effective organizing must first consider basic mission and
long-range objectives established for the organization and
the strategy.
Therefore, key activities have to be considered first

cetinerg@itu.edu.tr

Dr.B.G.Cetiner

ORGANIZING

Organizing by Key Activities

Ask three questions to identify key activities
1. In what area is excellence required to obtain the companys objectives
2. In what areas would lack of performance endanger the results?
3. What are the values that are truly important to us in this company?

cetinerg@itu.edu.tr

Dr.B.G.Cetiner

ORGANIZING

Organizing by Key Activities

After establishing key activities,
two additional works are suggested:
1. Decision Analysis
What decisions are needed to obtain effectiveness in key activities?
(Futurity, effectiveness on the functions, frequency and results
are addressed)
2. Relations Analysis
With whom the person in charge of an activity will have to work?
Find the crucial relations for success and effectiveness. These
relations should be easy, accessible, and central to unit.
cetinerg@itu.edu.tr

Dr.B.G.Cetiner

ORGANIZING

Patterns of Departmentalization
P r im it iv e O r g a n iz a t io n
You
Tom

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D ic k

M a ry

Dr.B.G.Cetiner

ORGANIZING

Patterns of Departmentalization
Functional Departmentalization
President
Finance
Manager

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Production
Manager

Sales
Manager

Designer

Dr.B.G.Cetiner

ORGANIZING

Patterns of Departmentalization
President
Finance Production
CD Cabinet Div
Acctg

Prodn.

Mktg

Pers.

Marketing

Disk Box Div.

Acctg

Prodn.

Product Departmentalization
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R&D

Mktg

Pers.

Dr.B.G.Cetiner

ORGANIZING

Patterns of Departmentalization
President
Finance Production
Western Division
Acctg

Prodn.

Mktg

Pers.

Marketing

R&D

Eastern Division
Acctg

Prodn.

Mktg

Geographic Departmentalization
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Pers.

Dr.B.G.Cetiner

ORGANIZING

Patterns of Departmentalization
President
Finance Production
CD Cabinets

Disk Boxes

Parts

Finishing

Assembly

Marketing
Western Sales

Eastern Sales

Industry Sales

Consumer Sales

Mixed Departmentalization
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R&D

Dr.B.G.Cetiner

ORGANIZING

Span of Control
Defines number of Subordinate Managers
CEO

M
wwww

wwww

wwww

wwww

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wwww

wwww

wwww

wwww

wwww

wwww

wwww

wwww

Control of Span for 4

(needs 20 managers)

M
wwww

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wwww

Dr.B.G.Cetiner

ORGANIZING

Span of Control
Defines number of Subordinate Managers
CEO

M
wwww
wwww

M
wwww
wwww

cetinerg@itu.edu.tr

M
wwww
wwww

wwww
wwww

wwww
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wwww
wwww

Control of Span for 8

(needs 8 managers)

M
wwww
wwww

Dr.B.G.Cetiner

ORGANIZING

Span of Control

CEO

M M M M M M M M M M M M M M M M
wwww wwww wwww wwww

wwww wwww wwww wwww wwww wwww wwww wwww

Narrow
Span

wwww wwww wwww wwww

CEO

Wider
Span

M
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Multiple Levels can increase communication and decision time

Narrow spans of control (tall organizations) are expensive (we have more managers)
Wide spans leave managers with inadequete times to supervise the activities.

cetinerg@itu.edu.tr

Dr.B.G.Cetiner

ORGANIZING

Factors Determining Effective Spans

Number of relationships that exists between manager
and subordinates individually and in various combinations,
and among the suordinates themselves.
Number of relationships with n subordinates

+n-1

For n=1, 1 relationship

n=2, 6 relationships
n=3, 18 relationships

250000
Relationships

n 2

(n-1)

300000

200000
150000
100000
50000
0
1

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9 10 11 12 13 14 15

Number of Subordinates

ORGANIZING
Following Conditions affect a manager to effectively supervise people
Subordinate Training
Nature of jobs Supervised
Rate of Change of Activities and Personnel
Clarity of instruction and delegation
Staff Assistance

cetinerg@itu.edu.tr

Dr.B.G.Cetiner

ORGANIZING
Current Trends in Spans
To increase the spans of control (decreases number of
organizational levels)

Results of Wider Spans

1. Significant reduction of administrative costs
2. More effective and efficient organization communication
3. Faster Decisions and closer interaction between organizational levels
4. Requirement for more personnel training for all levels
5. Better leadership at all levels

cetinerg@itu.edu.tr

Dr.B.G.Cetiner

ORGANIZING
Classification of Companies
1. Unit: production according to the Customer orders (job-shop)
2. Mass Production
3. Process

cetinerg@itu.edu.tr

Dr.B.G.Cetiner

ORGANIZING
Impact of Information Revolution
Reduction of number of workers, more skilled workers, requires
monitoring abilities rather than physical one.
Skills Required
1. Visualization (ability to manipulate mental patterns)
2. Conceptual Thinking (or abstract reasoning)
3. Understanding of processes such as machine fundamentals
and machine/material interactions
4. Statistical understanding (trends, and meaning of data)
5. Oral and Visual Communication
6. Attentiveness
7. Individual Responsibility
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Dr.B.G.Cetiner

ORGANIZING
Impact of Information Revolution
RESULT
Little future in industry for the uneducated employee

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Dr.B.G.Cetiner