ORGANIZING, DIRECTING, AND

CONTROLLING THE SMALL

BUSINESS
THE FORMAL ORGANIZATION
The organization chart is a diagram showing graphically
the relation of one official to another, or others, of a
company. It is also used to show the relation of one
department to another, or others, or of one function of an
organization to another, or others.
VARIOUS TYPES OF FORMAL
ORGANIZATION
🞂 Line type – this organization structure is based on the
direct flow of authority from the chief executive to the
subordinates
VARIOUS TYPES OF FORMAL
ORGANIZATION
🞂 Line type
Independent Hollow Blocks
Retail Store Manufacturing Firm
Owner/Manager
Owner

Manager Assistant

Assistant Manager Supervisor

Daily Wage Laborers

Employees
VARIOUS TYPES OF FORMAL
ORGANIZATION
🞂 Functional Type – the functional organization structure is
one which there are a number of functional specialists
supervising the activities of a single subordinate.
 VARIOUS TYPES OF FORMAL
ORGANIZATION
🞂 Functional Type
Owner Manager

Production
Production Production Production
Unit
Unit Unit Unit

Product Product Product

A A A

Product Product Product

B B B
VARIOUS TYPES OF FORMAL
ORGANIZATION
🞂 Line and staff type. This type of organization is
characterized by line functions directly responsible for the
achievement of organizational objectives and which are
indirectly influenced by staff functions though advice,
recommendations, research, and technical expertise.
🞂 Committee Type. A committee is a formal organizational
group created to carry out a specific organizational task. It
consists of a group of individuals vested with authority
and responsibility and performs a specific task which the
individual manager cannot complete.
VARIOUS TYPES OF FORMAL
ORGANIZATION
🞂 Committee Type.
General
Manager

Research and
Legal
Development

Production Finance Marketing

Supervisor Supervisor Supervisor

Laborers Clerks Salespersons

VARIOUS TYPES OF FORMAL
ORGANIZATION
🞂 Committee Type.
Two types of committees:
a. ad hoc – committee is created for a short-term purpose
and has a limited life.
b. standing – committee is relatively permanent and
performs a specific, recurring task, like reviewing
budgets, hiring practices, and pricing policies.
INFORMAL ORGANIZATION
An informal organization is the social structure of the
organization, as opposed to the formal structure of an
organization. It establishes how an organization functions
from a practical standpoint.
Informal organization vs Formal
Organization
Directing the Small Business
Directing refer to guiding and motivating employees to
accomplish organizational objectives. It involves explaining
procedures, issuing orders, and seeing that mistakes are
corrected.

Skills that required for effective directing:

1. Communicating with subordinates
Communication may be defined as a meaningful
exchange of information through messages.
Skills that required for effective directing:

Functions of Communication
a. Information Function – The SBO uses communication as a
means to gather information he needs for making decisions.
b. Motivational Functions – Communication is used to
motivate subordinates to contribute to the achievement of
company goals.
c. Control Function – The clarifications provided through
communication in terms of duties, authority and
responsibilities lay the ground for effective control.
d. Emotive Function – Communication provides subordinates
with an outlet for self-expression.
Skills that required for effective directing:
The Communication Process

Sender Encoder Medium

Decoder Receiver

2. Providing Counseling Services

3. Motivating
The popular methods and programs adapted to motivate
employees consist of:
1. Improving the organization of the elements of a job
Skills that required for effective directing:
Motivating
The popular methods and programs adapted to motivate
employees consist of:
2. Modifying organizational behavior
3. Harnessing recognition and pride
4. Financial incentives.

Maintaining Discipline
Discipline any action directed towards an employee for
failing to follow company rules standards, or policies.
Skills that required for effective directing:
Maintaining Discipline
Among the common reasons for disciplining employees are
the following:
1. Loafing 4. falsifying records
2. Absenteeism 5. insubordination
3. Fighting

Progressive Discipline – When SBO applies corrective

measures in increasing degrees to get an employee to
voluntarily correct inappropriate behavior.
Skills that required for effective directing:
Maintaining Discipline

Progressive Discipline
A typical discipline procedure consists of the following:
1. Verbal Warning
2. Written Warning
3. A one-day suspension
4. Three-day suspension
5. Termination
Controlling the Organization
Controlling refers to the process of efficient performance to
attain the objectives of the firm.
Controlling involves the following:
a. Establishing goals and standards
b. Measuring performance against the established goals
and standards
c. Reinforcing successes and correcting shortcomings
Controlling the Organization
Kinds of Control
Control consists of various types and those appropriate for small business

Stage Appropriate Control Tools

1. Start-up Simple accounting records and personal
supervision
2. Early growth Operational budgets, management by
objectives
3. Late growth Greater use of budgets, standard cost
systems, use of computer
4. Resource maturity More sophisticated use of control
measures indicated in the late growth stage