What type of organization do you work in; or would you like to work in? Would you find it easy to classify it as Commercial, Industrial, or Service? Can you see how it fits into general economic activity around you? Did you know it is one contributory element of our mixed economy? What is a mixed economy?
Consider Fig. 1 and see which your chosen organization fits into. Our ‘mixed economy’ is demonstrated by the varied, interrelated, and often interdependent, sectors of economic activity.
(a)
primary
fishing
farming
extractive
----INDUSTRY----
secondary
construction
manufacturing
(b)
trade
wholesale
retail
import
export
----COMMERCE----
commercial services (support)
transport
finance
insurance
(c)
public
postal (national)
refuse collection (local)
----SERVICE----
personal
hairdressing
plumbing
retailing
Fig. 1
Within these main sectors there are, as you can see, many different types of organisation, each of which has its own particular characteristics, functions, and benefits. Some are easily recognised as private enterprises, some are definitely public enterprises.
Private Enterprise
Type of organisation
Functional area
Characteristics
Sole proprietor
Usually personal services such as hairdresser, corner shop, painter and decorator
1. The owner provides the necessary capital, operates the business, takes the profits, and is liable for debts.
2. Problems can be limited capital and unlimited liability.
3. Advantages can be independence, direct customer contact, and the ability to change quickly, according to market demands.
(Unlimited) partnership
Can be personal services, small industrial concerns, and small commercial organisations.
1. The provision of capital is easier with 2-20 partners, and liability for debts is spread.
2. Management of the business is shared and there is wider expertise available.
3. Liability for debts is unlimited.
4. Problems can arise on death or withdrawal of partner.
(Limited) partnership
Some basic principles as unlimited partnership, but some partners, who must not be involved in managing the business, have limited liability for debts.
(Limited) private company
Medium-sized or small organisations:
e.g. building
wholesalers
manufacturing
transport
1. The company must be registered.
2. Capital comes from the shareholders, and more is usually available.
3. The company is a legal entity in itself – separate from the shareholders.
4. One or more directors are appointed to run the business, but control still lies with the shareholders.
5. There is limited liability for debts.
6. Profits are shared through a dividend paid on shares.
7. Disadvantages are that the company must adhere to quite complicated legal formalities and it is forbidden to advertise for share capital.
Public limited liability (plc)
Large-scale organisations:
e.g. construction
manufacturing
commercial services
1. Anybody can become a shareholder, and there is no limit on the number.
2. Information on the company must be available to the public, and shares are bought and sold on Stock Exchange.
3. Much more capital becomes available.
4. Ownership of shares can be transferred without affecting management.
5. Management is through Board of Directors specially appointed to run the business.
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Type of organisation
Functional area
Characteristics
Multinational company
Large-scale organisations:
Variety of activities within the general ‘interest areas’ of the company (ies).
1. Produces goods in more than one country.
2. Owns and controls the producing agencies.
3. Can contribute enormously to the economy of a country by ‘importing’ capital and technology.
4. If a multinational decides to move resources (e.g. capital, or a production process) from one country to another, it can damage the economy of the original country.
Public Enterprise
Type of organisation
Functional area
Characteristics
Public corporation e.g. National Coal
Board
Usually key areas of economic activity. Can provide goods or services which would not be profitable for a private concern.
1. Run by a Board appointed by government.
2. Ownership rests with the public.
3. Unlimited liability.
4. Any losses are borne1 by the public.
5. The government (Parliament) determines the aims and objectives of the organisation.
Mixed enterprise
(organisation) in which the government has a substantial stake)
e.g. BP2
ICI3
Any area, but often production.
1. The State is a shareholder in the company (i.e. public and private enterprise together).
2. The state usually provides capital, but can influence aims and objectives.
3. Usually the company still has to compete in the marketplace.
4. Sometimes a ‘privatised’ public organisation ends up as a mixed enterprise.
Central government departments
e.g. Employment
Health
Social Services
Basically an administrative role in a specialist area on a nation-wide basis.
Can exert influence over the activities of all organisations, both public and private, and there- fore affects all eco- nomic and social life.
1. Usually bureaucratic and show change.
2. It can be difficult for members of the public to get access to information they require.
Local government department
e.g. Rates
Housing
Education
Usually have a statutory duty to provide services to local community.
1. There are likely to be differences in the level offered by different Local Authorities.
2. Subject to political influence.
3. Local people can have direct access to essential services.
ORGANISATIONAL STRUCTURE AND COMMUNICATION
Two main characteristics of any organisation are (a) the division of labour, and (b) the distribution of authority. The ‘division of labour’ refers to the variety of operations that the organisation must carry out in order to achieve its main objectives. The ‘distribution of authority’ refers to the decision-making apparatus required to plan and control these operations. Both of these characteristics may be shown in the organisation chart.
THE PURPOSE OF ORGANISATION CHARTS
An organisation chart can be thought of as a two-dimensional model of an organisation. No such model can effectively convey the reality of executive responsibilities or the complexity of the interrelationships that exist between the different sub-systems. Organisation charts are, therefore, an attempt to illustrate the formal relationships in an organisation, the main lines of communication, and the flow of authority and responsibility through all levels of the management hierarchy. Above all, organisation charts provide a complete picture of the organisation in a way that is simple to understand.
Charts are used to show the whole organisation (system), the departments (sub-systems) within an organisation, or details of the department or section only. Some organisation charts concentrate on the functions of organisation as opposed to the structure of personnel.
