Business Organization and Management
What the examiner expects
Business organization covers why firms exist, the main legal forms, and how ownership affects liability, control and finance. Be ready to compare sole proprietorship, partnership, private and public limited companies, cooperatives and state enterprises on liability, continuity, capital and decision-making. Management is the process of getting work done through others; learn the functions of planning, organizing, staffing, directing and controlling, and the three levels of management. Know the difference between administration, which sets policy, and management, which executes it, and between line and staff authority. Span of control, chain of command, delegation, centralization and decentralization are frequent short-answer items.
Traps
- Liability is the commonest trap: a sole trader and ordinary partners have unlimited liability, while shareholders of a limited company do not.
- A private company cannot invite the public to subscribe for shares; a public company can, but public does not mean state-owned.
- Controlling compares actual performance with standards and corrects deviations; it is not coordination.
- Delegation transfers authority, not accountability.
Worked example
A supervisor can effectively supervise six workers. A workshop employs 36 workers, so six supervisors are needed, plus one works manager above them. The chain contains 1 + 6 = 7 managerial positions, with a span of six at the bottom level. If the span rose to nine, four supervisors would suffice (36 ÷ 9 = 4), cutting cost but increasing each supervisor's load.
Rule of thumb
Choose the legal form by liability first, then capital need, then control: unlimited liability usually comes with full control, limited liability with shared control.