Organizational Structure

Sectors

Commercial Sector

3 basic forms:

Sole proprietor

Partnerships

Corporations

Sole Proprietor

One owner

Unlimited liability

Sue business & owner

Advantages & disadvantages….

Sole Proprietorship

Advantages DisadvantagesTotal control over decision making Limited managerial experience

Revenues taxed only once (corporate tax exempt)

Unlimited personal liability

Great flexibility Lasts only as long as the owner lives

Easy to form Limited access to capital funds

All profits retained by owner 80% fail

Easy to sell

Partnership

Two or more entities

Least popular form of ownership

Have written agreement of each owners responsibilities

4 types of partners….

4 forms of Partnerships

1. General Partnership

Common form of partnership

Each partner is fully responsible for liabilities

Share the costs & benefits of the business

4 forms of Partnerships

2. Limited Partnership Also, very common

One or more partners can be limited

Limited partner has limited authority

Liability based on amount of capital invested

Names of limited partners not in name

4 forms of Partnerships

3. Secret partner

Identity of an owner is unknown to the public

Secret partner can participate in management but has limited financial responsibility

4 forms of Partnerships

4. Dormant partner (silent partner)

Invests only money

Not involved in management of the organization

Liable only for the amount of his/her investment

Mix of partnerships & company Taxed as a partnership Has limited liability of a company Easier to form than C or S Corp Dissolves when a member dies or

wants out

LLC & LLP

LLC/LLP

Advantages DisadvantagesSome control over decision making

Limited managerial experience

Revenues taxed only once (corporate tax exempt)

Limited access to capital funds

Great flexibility When partnership dissolves, entire business must be liquidated

Easy to form & sell Partners must get permission from other to leave business

All profits retained by owner

Liability is limited to the LLC/LLP

C Corporations

Seen as a fictional, legal person & can…. Own, manage, & sell property Sign binding contracts Sue & be sued Pay corporation taxes

20% of all businesses & 80% of ave. annual sales

Owners are shareholders Limited liability up to amt of investment Run by a board of directors representing the shareholders

S Corporations Like C Corporation in formation Distributes all profits so that the

corporation isn’t taxed Shareholders are taxed since they get

the profits Only form if ALL profits are distributed

S Corporations

Corporations

Advantages DisadvantagesUnlimited life of corporation Complex formation process

Creditors can’t come after shareholders beyond their investment

Multitude of government regulations

Easy to transfer ownership – just sell stock

Double taxation

Obtain capital through selling stock or borrowing money using company assets as collateral

Financial records are public, privacy lost

Ability to hire broad base of talented managers

Franchises

Method of doing business, not ownership

1 co. grants another business right & license

3 Forms Trade name Product distribution Pure Franchise

Franchise

Advantages DisadvantagesOwnership of a small business quickly

Freedom, limited by contract

Product & brand name Cost of initial franchise fee & royalty fees

Support from franchisor

Public Sector

Tax supported

3 types Federal Agencies State Agencies Local Agencies

Local Parks & Recreation

Municipalities

Cities, townships, counties, boroughs

Budget from the city

Local Parks & Recreation Special District laws

Independent governing bodies

Direct taxing & bonding ability

20% of the 31,555 special districts in US relate to natural resources

9 states over 1000 special districts

State Agencies

Est. thru state legislation

State budget allocations

Focus: Outdoor rec, arts, tourism, human

services, education, health

Federal Agencies

Authority & budget from Congress

U.S. Department of Health & Human Services

Morale, Welfare & Recreation

Nonprofit Agencies

Formally constituted for public benefit

Funded through fees, charges, donations &

grants

Private as opposed to governmental (NGO’s)

Not profit distributing, but can make a profit

Self-governing - boards

Nonprofit Agencies

Federal, sales & property tax exempt

Special postage rates Not all donations to npo are tax

exempt Exempt from labor unions Nonprofit Corporation Types of nonprofits….

Nonprofit Agencies

Organization Mission Door County (WI) Sample orgs

501(c)(3) Religious, charitable, or educational & exist for public benefit; amateur sports

American Bowling Congress Inc; Door County Skate Inc; Little League Baseball, Inc; Hospitals; NIFS

501(c)(4) Civic leagues, social welfare organizations & local associations of employees

Four Seasons; Peninsula Golf Association Inc; Northern Door Volleyball Association Incorporated;

501(c)(7) Social clubs organized for recreation & other purposes for the benefit of its members

Door County Golf Association; Sturgeon Bay Yacht Club; Trilliun Quilt Guild

* 20+ nonprofit categories in the IRS code

Sector/ Income Taxes Grants,

donations, sponsorship

s

Fees & Charges

Investment

Contractual

Commercial Sector

Pays them – property, income, sales

Minimal Major source

Major source

Can be a major source

NPO Doesn’t pay or receive

Major source

Major source

Limited, based on available cash

Growing importance

Public Sector

Essential

Growing importance

Major source

Limited, based on available cash

Growing importance

Commercial Owners, shareholders

NPO Back into agency

Public Into agency or city

Where do the profits go?

Organizational Structure

6 elements to address for a proper organizational structure

1. Work specialization2. Departmentalization3. Chain of command4. Span of Control5. Centralization or decentralization6. Formalization

Organizational Structure

1. Work specialization

Division of labor

Jobs broken into steps with multiple people doing their individual part to make the entire product

Assembly lines, McDonald’s

Organizational Structure

1. Work specialization

Advantages Used to increase productivity Allows skill building on the job

Disadvantages Good to a point & then diminishing returns Boredom, absenteeism, stress, high turnover

Organizational Structure

2. Departmentalization Grouping of jobs according to (4):

Function/process

Trainers Group fitness instructors Fitness assessments Research Education

Organizational Structure

2. Departmentalization Grouping of jobs according to (4):

Product Nike: Golf, shoes, clothing REI: Clothing & footwear, snow gear, water gear,

land gear

Geography Gametime – 18 independent U.S. Reps

Organizational Structure

2. Departmentalization Grouping of jobs according to (4):

Customer retail, wholesale, government corporate vs. individual clients physical therapists, athletic trainers

Organizational Structure

3. Chain of command

Unbroken line of authority The right to exercise influence, give

directives or make certain decisions within the organization

Organizational Structure

3. Chain of command Key issues

Unity of Command

Seeing less chain of command with empowerment

Organizational Structure

4. Span of Control # of people, units, & operations a mgr

can control effectively & efficiently

Small span of control – supervise smaller number of people

Larger span of control – supervise larger number of people

Organizational Structure

4. Span of Control # of people, units, & operations a mgr

can control effectively & efficiently

Small span of control – supervise smaller number of people

Larger span of control – supervise larger number of people

Organizational Structure

4. Span of Control

See smaller span of control at top & larger at bottom of org.

7 is optimal but depends on work done

Which is better? Smaller or larger?

Organizational Structure

4. Span of Control Larger – fewer managers, more ee’s

reporting to them Reduces cost, speeds decision making Get closer to the customer Empower employees Fewer layers of employees Invest in training staff

Organizational Structure

4. Span of Control Smaller – more managers with fewer

ee’s Tight managerial control Increase cost of managers Added managers slows

communication Encourages micro-managing &

discourages ee autonomy

Organizational Structure

5. Centralization or decentralization

Degree to which decision making is concentrated at a single point in the organization

Organizational Structure

Centralization

Top managers make all the decisions

Consistency in decision making

Slow process…move up the chain of command

Organizational Structure

Decentralization Decision making is pushed down to mgrs

closest to the action

Quicker actions taken

More people provide input

EE’s less likely to feel alienated from decision makers

Mgrs closer to situation

Organizational Structure

6. Formalization

Degree to which jobs are standardized EE has minimal discretion in how, what

& when to do things Policies are strictly followed Explicit job descriptions Less formalization increases freedom