When entrepreneurs establish a business, they must decide on the form of business ownership. There are three basic forms of business ownership: sole proprietorship, partnership, and corporation. The form that is chosen can affect the profitability, risk, and value of the firm. The business ownership decision determines how the earnings of a business are distributed among the owners of the business, the degree of liability of each owner, the degree of control that each owner has in running the business, the potential return of the business, and the risk of the business. These types of decisions are necessary for all business. Sole Proprietorship A business owned by a single owner is referred to as a sole proprietorship. The owner of a sole proprietorship is called a sole proprietor. A sole proprietor may obtain loans from creditors to help finance the firm’s operations, but these loans do not represent ownership. The Continue reading
Principles of Management
The Principles of Modern Management by Frederick Taylor
Frederick Taylor, known as the Father of Scientific Management, conducted many studies at Bethlehem Steel Company in Pittsburgh. His experience as an apprentice, a common labor, a foreman, a master mechanic, and then a chief engineer of a steel company gave Taylor an excellent opportunity to know first hand the problems and attitudes of workers and to see the great possibilities for improving the quality of management. To improve productivity, Taylor examined the time and motion details of a job, developed a better method for performing that job, and trained the workers. Taylor also offered a piece rate that increased as workers produced more. In 1911, published a book “Principles of Scientific Management” in which he proposed work methods designed to increase worker productivity. He defined management as art of knowing exactly what do you want to do and seeing that they do it and in the best and cheapest Continue reading
4 Phases of Hawthorne Experiment – Explained
At the beginning of the 20th century, companies were using scientific approaches to improve worker productivity. But that all began to change in 1924 with the start of the Hawthorne Studies, a 9-year research program at Western Electric Companies. The program, of which Elton Mayo and Fritz Roethlisberger played a major role, concluded that an organization’s undocumented social system was a powerful motivator of employee behavior. The Hawthorne Studies led to the development of the Human Relations Movement in business management. The experiment was about measuring the impact of different working conditions by the company itself (such as levels of lighting, payment systems, and hours of work) on the output of the employees. The researchers concluded that variations in output were not caused by changing physical conditions or material rewards only but partly by the experiments themselves. The special treatment required by experimental participation convinced workers that management had a Continue reading
Overcoming Challenges to Effective Organizational Performance
The main obstacles to effective organizational performance is already covered in this blog and the ways to overcome them are discussed below. 1. Employees Training and Development The hope is that employees who receive training in line with their individual or organizational goals will become more efficient in what they do. Organizations should look at the positive effects of training on employee performance, and consider employee development as a targeted investment into making the front line worker stronger. More importantly, development plans that include “train-the-trainer” (training that trains employees to become trainers of a skill) can provide exponential benefits to the organization. This training can be anything from how employees can do their own jobs better to these employees being groomed to replace their supervisor. In addition, employees who are invested as a trainer might be further inclined to stay with the organization, and possibly reduce employee turnover. 2. Motivation Continue reading
Functional Organization – Meaning and Features
Functional organization is technically called functional foreman-ship because the function itself becomes a supervisor and the employees automatically perform their respective duties. The emphasis of functional organization structure is on operations rather than on management. Functional organization is commonly used in business organizations. The spirit of organization, which involves grouping tasks together and allocating them to genuine employees is observed in functional organization. Functional sets like marketing, finance, production and personal are grouped systematically. Departments and sub departments are developed according to the requirements of the business. Functional organization is the basic building block or module from which other forms of organization are built. Functional organization is characterized by function, sub-goal emphasis, division of work, functional relationship, centralization and decentralization, span of control, divisionalization of product and regionalization. All employees are not equal; they have distinctive and special interests in different activities, while some of Continue reading
Johnson and Scholes Cultural Web Model of an Organization
The cultural web provides a way of auditing an organisation’s culture. It can also identify possible barriers within the existing culture to change. The web can also be used to describe the way an organisation should look after a transformation. This particular angle is of importance for this management project, because management felt that there was a clear difference between the current cultural web and the desired one within the organisation. Culture is defined in many different ways. However, in most definitions elements like “basic assumptions and beliefs of an organisation or “the accepted way of working and behaving in an organisation” are included. Johnson and Scholes describe organisational culture as: “the deeper level of basic assumptions and beliefs that are shared by members of an organisation, that operate unconsciously and define, in a basic fashion, an organisation’s view of itself and its environment.” The assumptions and beliefs are in Continue reading