Forms of Business Organizations

The form of a business organization takes may depend on the purpose, nature of
operations, and resources of the company. However, a business organization's form may
change along with the changing times and the demands they present.
Changing Forms of Business Organizations
Change is constant and organizations continue to undergo various
changes in form to ensure effectiveness, efficiency, and relevance in the world
of business.

Business organizations may be traditional (simple, functional, divisional, profit,

or nonprofit) or open/flexible in form.
Simple business organizations -
business organizations with few
departments, centralized authority
with a wide span of control, and
with few formal rules and
regulations
These are easy to manage
because of their simple form.
However, change of form follows as
the company expands its
operations.
Functional business
organizations - business
organizations that group
together those with
similar or related
specialized duties that
introduce the concept of
delegation of authority
to functional managers
like the personnel
manager, sales manager,
or financial manager but
allow CEOs to retain
authority for strategic
decisions
 Divisional business organizations - business organizations made up of
separate business units that are semiautonomous or semiindependent, with a
division head responsible for his or her unit's performance
In other words, each division has its own functional organization and its
own general manager; however, the central headquarters management
maintains responsibility for the delineation of organizational goals of the
individual divisions,
 Profit business organizations - business organizations designed for the
purpose of achieving their organizations' mission, vision, goals, and objectives
and maintaining their organizational stability through income generation and
profit-making activities
Immediate revenues or cost factors account for their success or failure.

Nonprofit organizations - business organizations designed for the purpose

of achieving their organizations' mission, vision, goals, and objectives,
providing service to clients without expecting monetary gains or financial
benefits for their endeavors
Their success or failure may be measured by the high or low evaluation
scores they obtain.

Open/flexible business organizations - formed to meet today's changing

work environment.
These affect and are affected by the environment and change, therefore,
becomes inevitable; other forms that emerged under this form are:

1. Team Structures - where the organization as a whole is made up of work

teams (small, but focused) that work together to achieve the organization's
purpose; popular in collectivist culture

2. Matrix Business Organizations

— those which assign experts or
specialists belonging to different
functional departments to work
together on one or more
projects; exhibit dual reporting
relationships in which managers
report to two superiors—the
functional manager and the
divisional manager
3. Project Business Structure
— a business organizational
form with a flexible design,
where the employees
continuously work on
projects assigned to them;
projects may be short-term
or long-term and members
disband when the project is
completed
4. Boundaryless Business
Organization - a business
organization whose design
eliminates vertical, horizontal,
or external boundaries, and is
described to be flexible and
unstructured; there are no
barriers to information flow
and, therefore, completion of
work is fast
Different organizations have different preferences as to the business form that
is appropriate for their need/s and the purpose of their exis tence. Managers,
therefore, must be creative in finding ways to structure or design and organize
work in their respective firms.

Definition and Nature of Planning

PIanning is the first management function and for good reason. It is a
crucial and essential part of management. Planning is important for the
following reasons:

• Planning provides direction to all of the organization's human resources—

both managers as well as employees. If they know what their firm or their
work unit is trying to achieve and what activities they should engage in to be
able to contribute to the achievement of the firm's set goals, they would
coordinate their actions and collaborate well with one another.
• Planning is important because it reduces uncertainty; it compels managers
to consider future events that may affect their company. Anticipating changes
and their impact will help managers and other workers to react to such
changes appropriately.

• Minimizing of wastes will result if there is proper coordination of activities

due to planning; negative practices, ineffectiveness, and inefficiencies could be
easily detected and can be corrected or eliminated.
• Establishing goals and standards during planning may be used for
controlling, another necessary managerial function.

Without planning, goals and standards will be absent and controlling will not be
possible since there will be no standard to compare or assess work effort with.
Definition and Nature of Planning

Planning is the first management function and for good reason. It is a crucial and
essential part of management. Planning is important for the following reasons:

• Planning provides direction to all of the organization's human resource-both managers

as well as employees. If they know what their firm or their work unit is trying to achieve
and what activities they should engage in to be able to contribute to the achievement of
the firm's set goals, they would coordinate their actions and collaborate well with one
another.

• Planning is important because it reduces uncertainty; it compels managers to consider

future events that may affect their company. Anticipating changes and their impact will
help managers and other workers to react to such changes appropriately.

• Minimizing of wastes will result if there is proper coordination of activities due to

planning; negative practices, ineffectiveness, and inefficiencies could be easily detected
and can be corrected or eliminated.
• Establishing goals and standards during planning may be used for controlling, another
necessary managerial function. Without planning, goals and standards will be absent and
controlling will not be possible since there will be no standard to compare or assess work
effort with.
Difference between Goals and Plans
Goals are the targets or desired ends that management wants to reach, while plans arc
the actions or means that administrators/managers intend to use to achieve
organizational goals. In short, goals serve as the foundation of planning; goals precede
plans because knowing the desired targets is a must before establishing plans for
reaching them.
Types of Plans
Organizational plans can be generally described in terms of comprehensiveness, length of
time covered or time frame, specificity, and frequency of use.

Comprehensiveness refers to the completeness of planning coverage; for example: it may

start from plans that cover the entire organization, called strategic plans, up to
operational plans that apply to a particular operational area only.

Specificity refers to very detailed, clearly defined plans wherein objectives are clearly
stated and could easily be understood.

Frequency of use refers to the number of times or instances a plan may be used. For
example, strategic plans have single use, while operational plans are usually standing or
are used frequently or for several times.
Types of Plans
Strategic plans — plans that establish the organization's overall goals and apply to the
entire firm; they are broad in scope and are the responsibility of the CEO, president, and
general manager of the company
Operational plans — plans that apply to a particular unit area only; their scope is
narrow; achievement of company goals may not be achieved if operational plans are
not clear
Long-term plans — plans that go beyond three years; everyone must understand the
organization's long-term plans to avoid confusion that may divert the organization
members' attention

Short-term plans — plans that cover one year or less; such plans must lead toward the
attainment of long-term goals and are the responsibility of the unit/department heads

Directional plans — plans that are flexible or give general guidelines only; although
flexible and general, these plans must still be related to the strategic plans

Specific plans — plans that are clearly stated and which have no room for interpretation;
language used must be very understandable
Single-use plans — plans used or stated once only as this applies to the entire
organization; refer to the strategic plans of the firm

Standing plans — plans that are ongoing; provide guidance for different activities done
repeatedly; refer to the identified activities of operational plans
Steps in Planning
Planning is a process and, as such, involves steps—from carrying out its purpose, setting
of goals/objectives, and determining what should be done to accomplish them.
Schermerhorn (2008) gave five steps in the planning process:

1. Define your goals/objectives by identifying desired outcomes/results in very specific

ways.
2. Determine where you stand in relation to set goals/objectives; know your strengths
and weaknesses.

3. Develop premises regarding future conditions; anticipate future events, generate

alternative "scenarios" for what may happen; identify for each scenario things that may
help or hinder progress toward your goals/objectives;
4. Analyze and choose among action alternatives; list and carefully evaluate possible
actions and choose the alternative most likely to accomplish goals/objectives.

5. Implement the plan and evaluate results; take corrective action and revise plans as
needed.