Describe the ways to organize a small business.

Question

What will be an ideal response?

Answer 1

A small business owner can organize his or her business in many ways, but the most frequent ways are (1) by types of authority granted and (2) by activities to be performed. There is now a movement in small businesses toward using teamwork to bolster effectiveness, as larger companies have been doing for some time.
The organizational forms based on types of authority are (1) the line organization and (2) the line-and-staff organization. Within these types of organization is found another type-the informal organization.
A business may start with the owner doing all the work and then hiring a few people who do a variety of duties in producing, financing, and selling the firm's product. The owner is directly responsible for seeing that the employees do these things. This is called a line organization.
As the firm grows and becomes more complex, specialized workers-called staff-are hired to advise and perform services for those doing the operations, financing, and selling. This is called a line-and-staff organization. If the business is small and unincorporated, a tight, formal organization structure could stifle creativity and reduce initiative.
An informal organization always exists within the formal structure of a business. It involves the many interpersonal relationships that arise on and off the job. Two examples are the informal-leader and grapevine-communication systems. One cannot fight it, so if one is wise, one will determine who the informal leaders are and get their support for one's activities.
When one sets up the formal organization structure, one can group the activities into small, workable groups according to:

1. Function performed, such as production, sales, or finance.
2. Product sold, such as menswear, ladies' wear, and so forth.
3. Process used, such as X-rays, operating room, and food service in a hospital.
4. Area served, such as urban, suburban, or rural.
5. Types of customers served, such as industrial, commercial, institutional, or governmental.
6. Project being managed, such as constructing a store or an apartment complex.