3rd MEETING : COMPANY ORGNIZATION/STURCTURE

Read the text below about different ways of organizing companies, and then label the diagram,
according to which of these they illustrate:

COMPANY ORGANIZATION/ 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 staff 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.

►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.

►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 favor them:

1. a 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)

Exercise 1. Complete the text using the correct form of the following verbs:

achieve allocate balance deal with develop employ establish follow require set

The top managers of a company (1) have to .........objectives and then develop particular strategies that
will enable the company to (2)......... them. This will involve (3)......... the company’s human, capital and
physical resources. Strategies can often be sub-divided into tactics - the precise methods in which the
resources attached to a strategy are (4) ......... . The founders of a business usually establish a “mission
statement” - a declaration about what the business is and what it will be in the future. The business’s
central values and objectives will (5) ......... from this. But because the business environment is always
changing, companies will occasionally have to modify or change their objectives. It is part of top
management’s role to (6) ......... today’s objectives and needs against those of the future, and to take
responsibility for innovation, without which any organization can only expect a limited life. Top
managers are also expected to set standards, and to (7) ......... human resources, especially future top
managers. They also have to manage a business’s social responsibilities and its impact on the
environment. They have to (8) ........... and maintain good relations with customers, major suppliers,
bankers, government agencies, and so on. The top management, of course, is also on permanent stand-
by to (9) ......... major crises. Between them, these tasks (10) ......... many different skills which are almost
never found in one person, so top management is work for a team. A team, of course, is not the same as
a committee: it needs a clear leader, in this case the chairman or managing director.
Complete the following collocations:

11. to set .........

12. to allocate .........

13. to ......... responsibility

14. to ......... standards

15. to ......... and ......... good relations

16. to ......... a crisis

Exercise 2. Complete the text using the following verbs:

appointed attacked combined defined constituted reviewed supervised supported

Large British companies generally have a chairman of the board of directors who oversees operations,
and a managing director (MD) who is responsible for the day-to-day running of the company. In smaller
companies, the roles of chairman and managing director are usually (1)......... . Americans tend to use
the term president rather than chairman, and chief executive officer (CEO) instead of managing director.
The CEO or MD is (2)......... by various executive officers or vice-presidents, each with clearly (3).........
authority and responsibility (production, marketing, finance, personnel, and so on). Top managers are
(4) ......... (and sometimes dismissed) by a company’s board of directors. They are (5) ......... and advised
and have their decisions and performance (6) ......... by the board. The directors of private companies
were traditionally major shareholders, but this does not apply to large public companies with wide share
ownership. Such companies should have boards (7)......... of experienced people of integrity and with a
record of performance in a related business and a willingness to work to make the company successful.
In reality, however, companies often appoint people with connections that will impress the financial and
political milieu. Yet a board that does not demand high performance and remove inadequate executives
will probably eventually find itself (8)......... and displaced by raiders.

Exercise 3. Make a structure organization in your own company with each function of every position.
Work by group.