Business Foundations: Management, HR, and Organizational Principles
Differences Between Formal and Informal Organization
There are two key distinctions between formal and informal organizations:
The formal organization comprises the structured relationships and official channels that exist within a company. In contrast, the informal organization consists of personal relationships, such as friendships or emotional connections, that develop among employees.
The formal organization defines job roles, reporting structures, and official communication channels, often documented in organizational charts. In the informal organization, authority frequently rests with influential individuals, and communication channels can be informal networks or even rumors.
Key Functions of Management
Management’s primary function is decision-making across all company aspects. A common approach is Management by Objectives (MBO), which involves developing a comprehensive company plan, setting goals and objectives for the organization, departments, and individual roles, and assigning responsibility for their achievement. The core functions of management can be summarized as:
Planning: The process of setting goals and determining the means to achieve them. This involves deciding in advance what should be done, how it should be done, and by whom. Planning occurs at different levels: strategic, tactical, and operational.
Control: Measures the degree of compliance with stated objectives. It involves comparing actual results against planned provisions, highlighting deviations (both positive and negative), and enabling corrective actions.
Human Resources Management Functions
Human Resources (HR) has three primary objectives:
Recruitment: Effective recruitment and selection enhance company efficiency and foster synergies. Conversely, poor hiring decisions can lead to significant legal and economic challenges for the enterprise.
Labor Relations & Communication: This involves activities related to the company and its employee representatives. Working conditions are typically outlined in a Collective Bargaining Agreement. Disputes may arise when reviewing employment issues, working conditions, or safety concerns.
Employee Motivation & Development: Motivating personnel, providing training, and fostering team integration are fundamental to modern enterprises. Without motivated employees, individual needs may not be met, and the company’s overall performance will suffer.
Organizational Principles for Business Success
Organizational theory studies the principles and standards that enable the efficient distribution of company resources to achieve strategic goals. All companies typically pursue two main objectives:
Profitability: Companies are established to generate profit. The more organized and efficient they are, the greater their earning potential.
Competitiveness: If a company is not as efficient as its competitors, it risks losing customers. The market naturally favors and rewards the most efficient firms.
An organizing principle is a fundamental rule or regulation designed to enhance a company’s performance and efficiency. Key organizational principles include:
Principle of Hierarchy: Within the company, it must be clear who gives orders and who obeys. This is known as the chain of command.
Principle of Unity of Command: To avoid conflicts, each employee should receive orders from only one direct supervisor.
Principle of Division of Labor: The entire activity of the company is broken down into simpler, specialized tasks. Each worker is assigned a specific set of tasks, defining their job role. This ensures clarity on responsibilities, prevents tasks from being overlooked, and minimizes internal conflicts among workers.
Principle of Authority and Responsibility: Authority within the company is always coupled with the results and consequences of exercising that authority. Greater authority implies greater accountability within the organization.
Principle of Delegation of Authority: As a company grows and workload increases, employees may become overwhelmed. To manage this, workers should delegate some of their tasks to others. This process is known as the delegation of authority or duties.