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GENERAL MANAGEMENT
CHECK POINT 15: MANAGEMENT STRUCTURE

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1. what is a management structure?
2. what is authority?
3. what is responsibility?
4. what is accountability?
5. the unity of command principle
6. line position
7. staff position
8. line relationship
9. staff relationship
10. advantages of line and staff positions
11. for serious business owners only
12. the latest information online
 

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GENERAL MANAGEMENT
CHECK POINT 15: MANAGEMENT STRUCTURE

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1. what is a management structure?
2. what is authority?
3. what is responsibility?
4. what is accountability?
5. the unity of command principle
6. line position
7. staff position
8. line relationship
9. staff relationship
10. advantages of line and staff positions
11. for serious business owners only
12. the latest information online
 

DO I NEED TO KNOW THIS CHECK POINT?

 

WELCOME TO CHECK POINT 15

TUTORIAL 1 General Management TUTORIAL 2 Human
Resources Management
TUTORIAL 3 Financial Management TUTORIAL 4 Operations Management TUTORIAL 5 Marketing
And Sales Management
1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96
2 7 12 17 22 27 32 37 42 47 52 57 62 67 72 77 82 87 92 97
3 8 13 18 23 28 33 38 43 48 53 58 63 68 73 78 83 88 93 98
4 9 14 19 24 29 34 39 44 49 54 59 64 69 74 79 84 89 94 99
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
 

HOW CAN YOU BENEFIT FROM CHECK POINT 15?

 
The main purpose of this check point is to provide you and your management team with detailed information about Management Structure and how to apply this information to maximize your company's performance.
 
In this check point you will learn:
 
• What is the organizational departmentalization?
• About departmentalization by function.
• About the advantages of functional departmentalization.
• About a divisional structure.
• About departmentalization by product.
• About departmentalization by service.
• About departmentalization by market.
• About departmentalization by customer.
• About departmentalization by territory.
• About matrix structure... and much more.
 

LEAN MANAGEMENT GUIDELINES FOR CHECK POINT 15

 
You and your management team should become familiar with the basic Lean Management principles, guidelines, and tools provided in this program and apply them appropriately to the content of this check point.
 
You and your team should adhere to basic lean management guidelines on a continuous basis:
 
Treat your customers as the most important part of your business.
Provide your customers with the best possible value of products and services.
Meet your customers' requirements with a positive energy on a timely basis.
Provide your customers with consistent and reliable after-sales service.
Treat your customers, employees, suppliers, and business associates with genuine respect.
Identify your company's operational weaknesses, non-value-added activities, and waste.
•. Implement the process of continuous improvements on organization-wide basis.
Eliminate or minimize your company's non-value-added activities and waste.
Streamline your company's operational processes and maximize overall flow efficiency.
Reduce your company's operational costs in all areas of business activities.
Maximize the quality at the source of all operational processes and activities.
Ensure regular evaluation of your employees' performance and required level of knowledge.
Implement fair compensation of your employees based on their overall performance.
Motivate your partners and employees to adhere to high ethical standards of behavior.
Maximize safety for your customers, employees, suppliers, and business associates.
Provide opportunities for a continuous professional growth of partners and employees.
Pay attention to "how" positive results are achieved and constantly try to improve them.
Cultivate long-term relationships with your customers, suppliers, employees, and business associates.

1. WHAT IS A MANAGEMENT STRUCTURE?

YOUR COMPANY'S MANAGEMENT STRUCTURE

The development of your company's management structure and creation of key management positions represents one of the most important elements of the organizing process.

A sound Management Structure represents the foundation of every successful organization and plays a critical role in ensuring effective planning and control of all its operational activities. The development of the company's management structure necessitates providing answers to several important questions outlined below.

QUESTIONS RELATED TO THE DEVELOPMENT OF A MANAGEMENT STRUCTURE

1.

What is the nature of operational activities within our company?

2.

What are the functions under which these activities should be carried out?

3.

What are the positions and titles to which these activities are assigned?

4.

Who are the employees who occupy positions indicated by the titles?

5.

What is the most practical way to coordinate all management activities of employees within our company?

 

MANAGEMENT STRUCTURE IN A SMALL COMPANY

The management structure in small and medium-sized companies may have several Managerial Levels, depending on the size of the organization. This structure provides the foundation of the overall Organizational Structure of every company.

Department Managers, for example, are accountable to executive management for the overall performance of their respective departments. 

The level of managerial Authority, Responsibility, and Accountability is usually defined in advance in accordance with the requirements of the organizational structure. Details related to the degree of authority, responsibility, and accountability are specified by relevant job descriptions and serve to contribute toward effective overall control and sound performance of the organization.

ARE YOU A ONE-PERSON BUSINESS OWNER?

If you are a one-person business owner, you may skip this check point at this stage because it is not applicable to a micro-business like yours.

However, it will be very beneficial for you to become familiar with the content of the entire check point in the future, because one day you may decide to take your business to the next level and employ additional employees within your organization.

 

ADDITIONAL INFORMATION ONLINE

Organizational Structure By James Slocombe.
Leaders, Bosses And Managers By Michael Josephson.
Jack Welsh's Management Matrix By The Success Institute.
Strategic Management - Organizational Structure By Cal Miramar University.
Introduction To Organizational Structure By Nick Kitchen, LSBF Global MBA.

2. WHAT IS AUTHORITY?

AUTHORITY

Authority represents a specified degree of discretion delegated to individuals to enable them to use their judgment, to have power in making decisions, and to issue instructions to subordinates. 

Although authority implies the managerial right to request performance of duties by subordinates, its strength rests upon the extent of acceptance of instructions by employees.
 
Authority is usually delegated in direct proportion to the level of responsibilities assigned to employees within a particular organizational structure. Authority within the company starts with the shareholders, passes to the elected Board of Directors, and is further delegated to management and their subordinates.

There are two main types of authority illustrated below.

TWO TYPES OF AUTHORITY

 Direct Authority

 Delegated Authority

Direct authority can be exercised by a manager over his or her subordinate if there is a direct functional relationship between them.

Delegated authority can be exercised by a manager over his or her subordinate if there is no direct functional relationship between them.

 

Authority within an organization can also be categorized as illustrated below.

 

THREE CATEGORIES OF AUTHORITY

   

Formal 
Authority

 

Functional 
Authority

 

 Personal 
Authority

Formal authority is prescribed by the company.   Functional authority is based on particular professional knowledge or skill.   Personal authority is based on seniority or any other outstanding quality of a particular manager.
 

WHAT IS RESPONSIBLE AUTHORITY?

The former U.S. Attorney General Janet Reno stated that:

"Responsible Authority means not only being able to take action, but knowing when and how to take that action”.

This definition is particularly important in the area of small business management and it should be understood and implemented by business owners and managers alike.

 

ADDITIONAL INFORMATION ONLINE

Science Of Persuasion By Robert Cialdini And Steve Martin.
The Art Of Influencing Without Authority By Anita Borg Institute.
Leveraging The Power Of Authority By Richard Wilson, Biz Training.
How To Speak So That People Want To Listen By Julian Treasure, TED
Power And Influence By Deborah Gruenfeld, Stanford Business School.

3. WHAT IS RESPONSIBILITY?

RESPONSIBILITY

Responsibility represents a specified number of tasks assigned to individuals who are answerable for their duties and the performance of their subordinates.

Responsibility commonly implies fulfillment of a particular objective, function, or obligation in accordance with orders issued and promises made.

IMPORTANCE OF A CLEARLY DEFINED RESPONSIBILITY

The process of Organizational Development requires detailed formulation of responsibility and its limitations for each activity and function, otherwise, the performance of individuals cannot be judged objectively.

Management with weakly defined responsibilities is usually neither able to carry the burden of simultaneous obligations nor to reach correct decisions throughout the company's operations.

 

ADDITIONAL INFORMATION ONLINE

Business Management Responsibilities By Dan Carey.
Responsibilities OF An Office Manager By Latanglia Jones.
Roles And Responsibilities Of Human Resources Manager By HR Crest.
Management Responsibilities By Michael Josephson, Josephson Institute.
How Profit And Loss Responsibility Motivates Products Managers By Ramsey Pryor.
 

WHAT IS SOCIAL RESPONSIBILITY?

Social Responsibility represents a specified norm of individual and organizational behavior which prescribes taking positive voluntary action in excess of minimal legal and social requirements designed to benefit various elements of external business environment and the society at large.

As a business owner, you are constantly challenged to make the right decisions related to your company and its adherence to various rules and regulations imposed by the local, state, and federal government. Moreover, you may find numerous opportunities to simply do "good deeds", such as contributing to selected non-profit charities or participating in various events which are designed to promote a specific social cause.

Steve Raybold effectively summarized several important advantages of Corporate Social Responsibility online.

Managerial Ethics are discussed in detail in Tutorial 1.

ADDITIONAL INFORMATION ONLINE

What Is Corporate Social Responsibility By Alstom.
What Does It Mean To Be A Responsible Business By Carol Sanford.
What Is Corporate Social Responsibility By Thomas Beschorner, U. Of St. Gallen.
Why Is Corporate Social Responsibility Important By Gavin Thompson, Microsoft.
Business Ethics And Social Responsibility By Matt Alanis, Alanis Business Academy.

4. WHAT IS ACCOUNTABILITY?

ACCOUNTABILITY

Accountability means being held responsible for results or outcome of a particular assignment.

Accountability represents an integral part of the process of delegating authority and responsibility within an organization. As a business owner or manager, you are responsible for ensuring that your organization or department meets specific performance objectives in a timely manner. At the same time you are also personally accountable to your partners or to your management team for meeting stated objectives within your organization

By accepting authority and responsibility, you and each employee in your organization should also accept credit for good performance or blame for unacceptable results. This is the only way to ensure that everybody within your organization, including you, will have the opportunity to maximize personal performance in order to achieve superior organizational results.

ADDITIONAL INFORMATION ONLINE

Blueprint For Accountability: Working The Dark Side By Link TV.
Coaching For Accountability By Cy Wakeman, Bulletproof Talent.
The 3A's - Accountability By Rich Harwood, The Harwood Institute.
Engagement Or Accountability By Jason Lauritsen, Bulletproof Talent.
Responsibility And Accountability By Brittany Henry And Chelsea Ranking.

5. THE UNITY OF COMMAND PRINCIPLE

WHAT IS THE UNITY OF COMMAND PRINCIPLE?

Henri Fayol, a world renowned French industrialist and one of the fathers of the scientific management, published 14 Principles In Management in 1916. According to Fayol, one of the essential principles of effective delegation, namely the Unity Of Command Principle, suggests that:

"Each individual in the organization should be accountable to only one superior."

Reporting to more than one superior usually confuses employees, subsequently reducing the overall effectiveness of the organizational performance. For this reason, you and your management team must ensure that each employee within your organization reports to only one superior.

The unity of command principle is applicable to various Departmentalization Methods and Organizational Structures discussed in detail in this tutorial. This includes:

 
Functional Structure.
Divisional Structure.
 
The only exception to the unity of command principle is the Matrix Structure which allows for dual reporting within the organization. Matrix structure is effectively used in project management organizations.
 

THE SCALAR PRINCIPLE

Following the selection of a suitable organizational structure, i.e. functional divisional, or matrix, it is necessary to establish an appropriate Set Of Relationships between various positions within the company.

These relationships are developed in accordance with the Scalar Principle, which states the following:

"The clearer the line of authority from the ultimate management position to each subordinate position, the more likely there will be responsible decision making and organizational communication within a company."

Irrespective of the company's size, there are two types of Positions as illustrated below.
 

TWO TYPES OF POSITIONS IN A COMPANY

Line 
Positions

Staff 
Positions

 
 

ADDITIONAL INFORMATION ONLINE

The Principles Of Strategy: Unity Of Command - Part 1 By Michael Collender.
The Principles Of Strategy: Unity Of Command - Part 2 By Michael Collender.
Fayol's 14 Principles Of Management By Matt Alanis, Alanis Business Academy.

6. LINE POSITION

WHAT IS A LINE POSITION?

Line Position is any position which is directly responsible for achieving company objectives. 

Line positions carry Line Authority within the simplest form of organization - Line Organization. Here responsibilities are delegated from the chief executive to first-level subordinates, i.e. vice presidents or department managers, who, in turn, delegate responsibilities to second-level subordinates and so on.

Each employee in a line organization is assigned a particular responsibility and reports to only one supervisor. 

Line organization does not have employees in advisory capacities or specialists, and its planning is carried out on a centralized basis. A typical line organization, based on a Functional Structure in a small or medium-sized company, has been illustrated earlier in this Tutorial.

7. STAFF POSITION

WHAT IS A STAFF POSITION?

Staff Position is any position whose main function is to provide service, advice, or counsel to line positions or to perform an auditing or monitoring function. Staff positions neither carry responsibility for achieving company objectives, nor have formal authority over the employees. 

Staff positions in a Line And Staff Organization merely provide line managers with advice in areas such as legal, human resources, finance and accounting, operations, marketing and sales. Moreover, staff members may be required to audit the company's performance in various areas of operational activities or to perform any additional duties upon request of line managers.

A typical line and staff organization is presented below.

LINE AND STAFF POSITIONS IN A FUNCTIONAL STRUCTURE

8. LINE RELATIONSHIP

WHAT IS A LINE RELATIONSHIP?

Line Relationship exists in a Line Organization or a Line And Staff Organization.

Line relationship, for example, exists between the company's president and all vice presidents. An integral part of this relationship is Line Authority, which the president has over each vice president. 

The vice president finance, in turn, has line authority over the bookkeeper and credit controller. The vice president, operations has similar authority over the design manager, operations manager, and the buyer. Finally, the vice president, marketing has the same authority over the sales manager. Line relationship also exists between the design manager and the drafting staff, production manager and laborers, and sales manager and sales people.

9. STAFF RELATIONSHIP

WHAT IS A STAFF RELATIONSHIP?

Staff Relationship exists only in a Line And Staff Type Of Organization, where each staff member acts in an advisory capacity to his or her line manager and does not carry functional responsibility.
 

Thus, for example, staff relationship exists between the president and his or her assistant, or between the vice president, marketing and market research manager, or between sales manager and sales analyst.

In most small organizations with limited financial resources, line managers often perform dual duties, acting as staff members while carrying out their routine responsibilities. In larger organizations, however, the distinction between line and staff members becomes more visible

Staff Members are generally classified as Personal Staff and Specialized Staff as outlined below.

CLASSIFICATION OF STAFF RELATIONSHIPS

 Personal Staff

 Specialized Staff

Personal staff reports to the line manager and provides assistance in carrying out a broad range of duties. Line manager carries full responsibility for performance of those duties despite assistance by the personal staff.

Specialized staff is engaged in activities which may require special working skills that line manager does not possess. Thus, certain duties that cannot be performed by line managers are totally delegated to specialized staff, who carry full responsibility for accomplishing their work. In this instance, specialized staff carry functional authority over line managers within the limits of their functions.

 
A typical example of this arrangement, based on a Divisional Structure, is presented below
 

LINE AND STAFF MANAGEMENT POSITIONS IN A DIVISIONAL STRUCTURE

10. ADVANTAGES OF LINE AND STAFF POSITIONS

The three types of Line And Staff Positions, illustrated earlier, are summarized below
 

THREE TYPES OF LINE AND STAFF POSITIONS

   

Line 
Position

 

Personal Staff 
Position

 

Specialized Staff 
Position

President, general managers of Divisions A, B, and C, and line managers of finance, production, and marketing.   Assistant to president and assistants to divisional managers.   Vice presidents, human resources, finance, production, and marketing.
 

ADVANTAGES OF LINE AND STAFF POSITIONS

In this organizational structure, the president holds Line Authority over all vice presidents and divisional managers. Each divisional manager, in turn, exercises line authority over all line managers within the division. 

However, all vice presidents who occupy specialized staff positions carry Functional Authority over each line manager within the limits of their function. Thus, for example, the financial manager in Division A reports to the general manager of that division and, in addition, is responsible to the vice president, finance at the corporate level.

The need for functional authority is very real in many organizations. This need arises from the necessity to ensure uniform application of expertise in carrying out various tasks. 

One of the prime disadvantages of functional authority is the creation of Dual Accountability, similar to the arrangement that exists in a matrix structure. It is essential to ensure, therefore, that the extent of functional authority is clearly spelled out to managers who use it and to subordinates who are subjected to it.

 

ADDITIONAL INFORMATION ONLINE

Organizational Structures By Mr. Acidavi.
Organizational Structure By Mike Fletcher.
Organizational Structure By Robin Harris.
Business Structures By Carole Machin, TV Choice Films.
Project Organizational Structure Simplified By Software Maniacs LSM.

11. FOR SERIOUS BUSINESS OWNERS ONLY

ARE YOU SERIOUS ABOUT YOUR BUSINESS TODAY?

Reprinted with permission.

12. THE LATEST INFORMATION ONLINE

 

LESSON FOR TODAY:
An Organization With Indispensable Men Is Guilty Of Management Failure!

Harold S. Hook, CEO, American General Corporation

Go To The Next Open Check Point In This Promotion Program Online.