ORGANIZING, DIRECTING AND CONTROLLING THE
SMALL BUSINESS
Organizing- the means which management blends human &
material resources thru the design of a formal structure of tasks
& authority. The output of this function is the organization which
indicate who performs which task & who supervises whom.
Management’s Concern in the Organizational Structure
1. Identification of activities necessary to reach the goals
2. Analysis of the jobs to be performed
3. Hiring of people with both an interest in and possessing
the necessary qualifications of preforming the jobs
Considerations in doing the above-mentioned concerns:
1. Specialization
2. Departmentalization
3. Delegation of authority
4. Span of management
5. Hierarchy of objectives
6. Degree of centralization
SPECIALIZATION
The first task of the manager is to determine the total
function of the organization. He, then, divides the total work into
small, specialized tasks & assigns employees to specific tasks.
The purpose of specialization is to make employees
more efficient. This is possible because if a person is assigned
a specific task, he masters it after a while.
DEPARTMENTALIZATION
When jobs are grouped into working units, the process.
The units are, then called departments, units, groups, or
division.
Departments may be organized according to:
- function - product -territory - customer
DELEGATION OF AUTHORITY
When an organization grows beyond phase 1 some of
the tasks will have to be delegated to responsible subordinates.
This is so because making decisions cannot all be undertaken
by a single person, no matter how good he is.
SPAN OF MANAGEMENT
The small business operator must consider the
number of subordinates who must report to a supervisor. When
there are too many subordinates reporting to a single
supervisor, the efficiency of directing and controlling the
subordinates may be sacrificed.
HIERARCHY OF OBJECTIVES
“Ordering objectives” so that the achievement of all
low-level objectives results in the achievement of higher
organizational objectives.
DEGREE OF CENTRALIZATION
A centralized organization is characterized by the
concentration of authority for decision-making in the hands of
one or a few, usually the chief executive or top management.
Centralized decision-making is adapted when the decisions to
be made are risky and when lower level managers are not highly
skilled in decision-making.
A decentralized organization is one where authority
is widely delegated to subordinates.
Kinds of Formal Organization
A formal organization is defined as “the sum of clearly
defined relationships, channels of communication, and
responsibilities resulting from the delegation of authority from
one organization level to another.”
Kinds of Formal Organizations:
1. Line Organization
- based on the direct flow of authority from the chief executive
to subordinates.
2. Functional Organization
- there are a number of functional specialists supervising the
activities of a single subordinate.
3. Line and Staff Organization
- line functions directly responsible for the achievement of
organizational objectives and which are indirectly influenced
by staff functions through advice, recommendations,
research, and technical expertise.
4. Committee Organization
- a formal organizational group usually relatively long-lived,
created to carry out a specific organizational task.” It consists
of a group of individuals vested with authority and
responsibility and performs a specific task which the
individual manager cannot complete.
2Types of Committee:
A. Ad Hoc B. Standing
The Informal Organization
A group of persons “not prescribed by the organization
but developed because of proximity, common interest, and
individual need satisfaction.”
Ex: a group of nine individuals working in the same
company who meet every Sunday and play tennis.
Applicability of Organizational Structure to Small Business
Many small business ventures will adapt the line structure due
to the following reasons:
1. Its simplicity is conducive to an immediate start-up in
operations
2. It is a good launching mechanism for the more sophisticated
organizational structures
3. It is adaptable to small-scale operations as all personnel will
be fully occupied with work
Directing the Small Business
Directing is the management function that involves
influencing others to engage in the work behaviors necessary to
reach organizational goals.
Skills Required in Directing:
1. Communicating with subordinates
2. Counseling
3. Motivating
4. Disciplining
Communicating with Subordinates
Communication is the transfer of information from one
person to another.
Functions of Communication
• Information function – Decision-making requires
information provided by communication.
• Motivational function – Communication is a tool used to
motivate subordinates to contribute to company goals.
• Control function – The clarification provided by the
communication in terms of duties, authority, and
responsibilities lays the ground for effective control.
• Emotive function – Communication provides an outlet for
self-expression.

The Communication Process

• Sender- speaks or dictates the message
• Encoder- transcribes what is spoken or dictated and
prepares it for sending
• Medium- conveys or transmits the message through
written, oral, nonverbal, or electronic means
• Decoder- interprets the message
• Receiver- receives the message.

Counseling with Subordinates

The small business operator must perform the additional role of
counselor so that hindrances in the attainment of company
objectives will be effectively cast aside. This additional task involves
“listening, giving advice, and preventing and solving employees’
problems.

Maintaining Discipline
Discipline is defined as “any action directed toward an employee for
failing to know company rules, standards, or policies.” Among the
common reasons for disciplining employees are the following:
1. Loafing
2. Absenteeism
3. Fighting
4. Falsifying records
5. Insubordination

Progressive Discipline
Most progressive discipline procedures include the following:
• Verbal warning
• Verbal reprimand
• Written reprimand
• Suspension
• Discharge
•
CONTROLLING THE ORGANIZATION
Controlling the organization is very important
management function. It is defined as “the process of assuring
efficient performance to attain the enterprise objectives.”

Controlling involves the following:

• Establishing goals and standards
• Company-measured performance against the established
goals and standards
• Reinforcing successes and correcting shortcomings
•
Kinds of Control
Control consists of various types and those appropriate to
small business will depend on the stage of growth of the firm.

Stage of growth of the firm:

Early Stage- Appropriate Control Tools
Start-up- Simple accounting records and personal supervision
Early growth- Operational budgets, management by objectives
Late growth- Greater use of budgets, standard cost systems, use of
computer
Resource Maturity- More sophisticated use of control measures
indicated in the late growth stage