Company Structure & Management Principles

Company Organization: Principles and Functions

• The company is a coordination unit.
• It involves the coordination of human activities and the use of material elements.
• In an enterprise, the work of coordination is called management.
• The administrative function of the company consists of four basic tasks:
  1. Planning: Establishing what is to be done.
  2. Organization: Using available information to assign tasks.
  3. Direction: Ensuring tasks are carried out as planned.
  4. Control: Making sure things are done properly.

Vertical Organization Principles

• Basic Principles:
  • Hierarchy
  • Authority
• Sub-principles or Basic Conditions:
  • Correspondence
  • Responsibility
• Derived Principles:
  • Unity of Command and Direction
  • Delegation and Decentralization
  • Span of Authority and Control (the number of subordinates under command and control)

Horizontal Organization Principles

• Basic Principles:
  • Division of Labor
  • Specialization
• Sub-principle or Basic Condition:
  • Functionality
• Derived Principles:
  • Departmentalization
  • Divisionalization
  • Coordination
  • Automation and Mechanization

Organizational Balance Principles

• Basic Principles:
  • Foundations
  • Participation
• Sub-principles or Basic Conditions:
  • Information
  • Communication
  • Legislation Principle
  • Management by Objectives

Division of Labor in Organizations

The division of labor is a fundamental process applied naturally since humanity began organizing in societies. The main advantages of the division of labor are:

• Increased skill and dexterity in work.
• Prevention of time loss when switching tasks.
• Facilitation of machine creation (as simple, repetitive tasks can be replaced by capital, e.g., a machine for tightening screws).

Despite these advantages, the division of labor cannot always be implemented or with the same intensity. The impossibility of division of labor is due to:

1. Environmental conditions.
2. The nature of the tasks.

The great advantage of the division of labor is the increase in efficiency.

Specialization and Job Design

Continuous emphasis on simple tasks leads to the acquisition of specific knowledge or skills. The set of elementary tasks assigned to a person is known as a "job" (the specific task or set of tasks to be carried out by an individual).

In workplace design, one must consider not only the advantages of specialization but also its drawbacks, which include:

• Physical fatigue (caused by repetitive activities).
• Atrophy of unused capabilities and boredom (mental fatigue).

To mitigate these negative effects, the following techniques are used:

• Rotation
• Enrichment of tasks

Task enrichment can be horizontal or vertical. Horizontal enrichment involves adding additional tasks at the same level as the current job, while vertical enrichment adds tasks at different hierarchical levels to the position.

Strategic and Operational Planning

Planning involves selecting means to achieve ends. Due to the complexity of an undertaking, this activity must be divided into parts, linking planning closely with the division of labor.

A plan is an organized set of strategies and actions designed to achieve specific purposes. When a plan is highly detailed, it is called a program. In management, plans can be categorized into three types (each level influencing the one below it):

• Strategic plans: Long-term objectives and ultimate aims.
• Operational plans: Guiding the firm's daily activities towards strategic goals.
• Routine plans: Detailed steps derived from operational plans.

This structure often resembles a pyramid, reflecting that there are fewer plans at the strategic level than at the routine level.

Organizational Hierarchy Levels

Hierarchy is the coordinating element among the three types of plans, both in their conception and execution. It is also structured as a pyramid, ranking the various degrees within a hierarchy:

• Senior Management
• Middle Management
• Operational Management