ORGANIZATION AND MANAGEMENT-NATURE-OF-ORGANIZATION

1. NATURE OF
ORGANIZATION
AND TYPES OF
ORGANIZATION
STRUCTURES
TOQUIB,CANOY,BAZAR,INCIPIDO

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Objectives:
K: Identify the nature of organization and
types of
organizational structures.
S: Analyze the nature of organization and
explain the
three common types of organizational
structure.
A: Appreciate the importance of organization
analysis and
design in determining the appropriate
hierarchical
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3. DEFINITION AND NATURE OF
ORGANIZATION
• An organization is a
collection of people who
work together and
coordinate their actions
to achieve a wide variety
of goals.
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• An organization is a social
arrangement which pursues
collective goals, which controls
its own performance, and which
has a boundary separating it
from its environment.

4. Sole
proprietorships
are attractive to small investors because they are
relatively easy to start up. Also, the owner entitled to all
the profits that the sole proprietorship collects.
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Advantages:
1. Formation: Less complicated in preparation
of documents and cheaper compared to
starting a formal corporation.
2. Tax benefits: no requirement to file a
separate business report. One will list the
business information and figures within his/her
individual tax return.
3. Decision making: Business decision
remains the responsibility of the owner.
Disadvantages:
1. Liability: The business owner will be held directly
responsible for any losses, debts, or violations coming
from the business.
2. Taxes: While there are many tax benefits to sole
proprietorships, a main drawback is that the owner must
pay self-employment taxes.
3. Lack of “continuity”: The business may discontinue if
the owner becomes deceased or incapacitated.
4. Difficulty in raising capital: Generating the capital or the
initial funds is usually provided by the owner. Sole
proprietorships do not issue stocks or other money-
generating investments unlike corporations.

5. PARTNERSHIP
• A partnership is a single business with two or more people sharing its
ownership. Each partner contributes to all aspects of the business, including
money, property, labor, or skill. In return, each partner shares in the profits
and losses of the business.
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Advantages:
1. Easy and Inexpensive: Partnerships are generally
an inexpensive and easily formed type of business
structure.
2. Shared Financial Commitment: Each business
partner has equally invested in the success of the
busines.
3. Complementary Skills: A good partnership
should be able to utilize the strengths, resources,
and expertise of each partner.
4. Partnership Incentives for Employees:
Partnerships have an
Disadvantages:
1. Joint and Individual Liability: Like sole
proprietorships, partnerships retain full, shared
liability among the owners.
2. Disagreements Among Partners: With multiple
partners, in the business, there can disagreements
like management styles, salary schemes, etc.
3. Shared Profits: Because partnerships are jointly
owned, each
partner must share the successes and profits of their
business with other partners

6. CORPORATION
• A corporation is a type of business that keeps the dealings, assets, and
bank accounts separate from his/her personal asset.
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Advantages:
1. Separate legal personality: A corporation, once
registered with the Securities and Exchange Commission
and is issued a certificate, has acquired a legal
personality separate and distinct from its stockholders. It
can sue and be sued.
2. Ease of raising funds: In a corporation, it is easy to
raise additional funds since it has the option to sell
shares of the corporation.
3. Continuity: It can have perpetual existence, which
means it can outlive its owner because it is a separate
person in the eyes of the law.
4. Ease of transfer of ownership: It is easy to transfer
ownership interests in a corporation.
5. Credibility: A business with an Incorporation or “Inc.”
sign after its name often sounds more credible in the
business context. One most likely attracts more partners,
Disadvantages:
1. More time and money spent in organizing: In a
corporation, it will require more time and money than
forming other sole and
partnership business type.
2. More paperwork: Several documentations and
paper works required by governmental agencies
monitor corporations.
3. Higher Tax: Corporate profits may be the subject to
higher overall taxes since the government imposes
taxes on profits at the corporate level and again at the
individual level if such profits are distributed to the
shareholders.
4. More costly: There are required number of board
meetings and annual shareholder meetings/sessions.

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TYPES OF ORGANIZATION STRUCTURE
There are different types of organizational set-up or structure. These
set-up or structure are designed to accomplish different goals. The
structure of an organization is crucial part in the progress of an
organization since it can help or hinder the organization in the
movement toward accomplishing these goals.
They come in different shapes and sizes. They can be “tall,” those
that have many tiers between the common worker and the owner of the
company, or they can be “flat,” meaning there are very few levels
between the common worker and the owner.

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A basic organization framework is called the line structure. A line structure organization has
only direct, vertical relationships between different levels in the firm.
A staff function, on the other hand, is intended to provide expertise, advice,
and support for the line positions.

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Advantages:
1. Tends to simplify and clarify authority
2. Promotes responsibility and accountability relationships
3. Promotes fast decision-making
4. Precise and simple to understand
Disadvantages:
1. Neglects specialists in planning
2. Overloads tasks on key personnel
3. It becomes more ineffective as the organization becomes bigger
4. Managers become experts in too many fields or area
5. Tendency to become overly dependent on the few key people who

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FUNCTIONAL STRUCTURE
It is a set up wherein each department of the organization is grouped according to its function or
purpose. The functional structure works very well for small businesses in which each department can
support itself by relying on the talent and knowledge of its workers.
DIVISIONAL
Divisional structure is another type of organization structure. This is typically used in larger companies
or organizations with several branches or outlets that operate in a wide geographic area or that have
separate smaller organizations within the umbrella group to cover different types of products or
market areas.

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MATRIXSTRUCTURE
A matrix structure is a hybrid of two structures namely, divisional, and functional
structure. Typically used in a large multinational company, the matrix structure
allows for the benefits of functional and divisional structures to exist in one
organization. One advantage point of the matrix structure is the flexibility and the
balanced decision-making

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The formal organization,
as discussed and
illustrated earlier,
are usually
represented with
organizational
charts and with
position
descriptions.
The informal organization
is a set of evolving
relationships and
patterns of human
interaction within
organization that do
exist but are not
officially prescribed.

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Organizational design is the
process of aligning an
organization’s structure
based on its vision and
mission. It is a careful
study at the complex
relationship between
task, workflows,
responsibilities, and
authorities, and making
sure these all support
the objectives of the
organizational strategy
and mandate
Organizationanalysis and design includes careful
examination of detail staffing levels and
hierarchy, spans of control, and repetitions of
roles in the context of the business’s strategy.
This implies that all work is not created equal-
there are some tasks that are more strategically
important to a company than others.
An organization is a dynamic and constantly changing
force; hence, organization structure should be
flexible and ready to adapt and respond to a
new and emerging needs and to the
requirements of the present as well as to the
future conditions and demands of business.

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