Chapters 6

Discussion Questions

6-1. Q: You have begun a small but growing business. What advantages and disadvantages
should you consider before changing it from a sole proprietorship to a corporation?
A: The advantages of keeping it a sole proprietorship include simplicity, lack of legal
restrictions, and single taxation of profits as personal income. Disadvantages include the
difficulty of raising capital and of transferring ownership. When personal tax rates are high and
corporate ones lower, there may also be an advantage in the corporate form in reinvesting money
rather than returning it to the owners through dividends

6-3. Q: Under what conditions might each of the following logics of departmentation be
desirable: functional, geographical, customer, product, and process?
A: Functional departmentation is common in the small organization, where only one manager
skilled in each function is affordable, and is also used at various levels in almost any
organization. Geographical departmentation is desirable where regional differences make
regional coordination between functions paramount; with modem communication it is seldom

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justified from considerations of sheer distance. Customer departmentation is indicated when

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adapting to customer differences is essential, as in design and manufacture of defense versus

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industrial goods or in sales to chain stores versus independent retailers.

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Product departmentation is indicated when coordination between functions regarding specific
products becomes more important than coordination within those functions.

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Process departmentation is indicated, ‘‘where equipment is so expensive, immobile, or critical it
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must be operated separately” or where equipment requiring skill in operation is used for many
purposes and no other arrangement has greater advantage

6-4. Q: Chart an organization with which you are familiar that has at least three organizational
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levels, and identify the number of people reporting to each manager at each level. How do the
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spans of control at the lowest level compare with those at higher level(s)?
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A: While organizations differ, it is common to find the largest spans of control at the lowest
(supervisor’s or foreman’s) level, with moderate spans at middle management level.
With the downsizing activities of recent years, the middle management levels have decreased and
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increased in span. The number of people reporting to the CEO varies from one (typically the
Chief Operating Officer) to two dozen or more, depending on the CEO’s style of management.
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6-6. Q: Distinguish between functional (specialized) staff authority and traditional line authority
A: Both functional and line authority are delegated by upper management. Functional authority
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commonly defines how some activity within the purview of a staff office is to be carried out by
line organizations, but does not commonly carry the authority to penalize directly for
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noncompliance.

6-12. Q: Discuss the strategy you will use in your career to assure you will remain in demand in
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a changing, competitive world.

A: This question is intended to lead to early class discussion. The topic is discussed in the
section on “Staying Technically Competent’ in Chapter 17, and the instructor may prefer to delay
coverage until then.

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