The Structure of Organizations
The Structure of Organizations
The Structure of Organizations
Organizations
Example:
An empty ground that is bought by a group of people from a real estate
company and now a group of educational institutions is formed in that area.
• This means each member is jointly and individually liable for the
debts of the company in the event of its formal liquidation.
• Normally it is the money paid to the company when the share is first
purchased.
Ahmad Sarosh Huda, Dept. of CS & IT, ILM College Sargodha
Fully Paid Shares
• A fully paid share means the purchaser has paid the total issue
price of the share.
• For example, they may have only paid 60 cents for a share issued at
1$.
• This means the company can, when it chooses and on giving notice
to the shareholder, request that the shareholder pay the balance on
each share, the remaining 40 cents.
• The par value of a share is the value below which shares cannot be sold
upon initial offering; the issuing company promises not to issue
further shares below par value.
• Hence investors can be confident that no one else will receive a more
favorable issue price.
Ahmad Sarosh Huda, Dept. of CS & IT, ILM College Sargodha
Shares Issued at a Premium
• A company issues its shares at a premium when the price at which
it sells the shares is higher than their par value.
• The amount of the premium is the difference between the par value
and the selling price.
• After all, if an employee owns stock in the company, then they will
likely feel motivated for the company to succeed and for the firm's
stock value to increase.
• People who don't pay off their accounts in full and carry a balance
month-to-month are subject to interest charges.
• The articles of association, which state how its internal affairs are to be
run.
• Separate from these documents and not formally part of the company’s
constitution, there may also be a shareholders’ agreement.
Ahmad Sarosh Huda, Dept. of CS & IT, ILM College Sargodha
The Memorandum of Association
• This document covers the following matters:
• Such an agreement can only be varied with the consent of all the
signatories.
Ahmad Sarosh Huda, Dept. of CS & IT, ILM College Sargodha
Directors and the Company Secretary
• The directors are elected by the shareholders to run the company
on their behalf.
• Directors must exercise the skill and care in carrying out their
duties that might be expected from someone of their qualifications
and experience.
• Provided the company has more than one director, the secretary
may be a director.
• The result is that the directors, together possibly with the senior
management, become self respecting.
• They run the company in their own interests rather than that of
the shareholders.
• On the one hand, some say that shareholders, as the owners of the
company, are free to exercise their rights so as to maximize their
income or profits, and that the duty of the directors is to pursue
this aim to the best of their ability.
• This is most obviously the case when a takeover bid is made, which
may provide shareholders with a handsome profit but will mean
many employees losing their jobs.
• The most obvious examples are in the field of food and drink but
there are plenty of examples in the field of professional services.
• If they are not clearly separated, there is a great risk that staff will be
moved from product development to fee-based work because the latter
brings more immediate and more certain revenue.
• The result is that the longer term rewards that can come from product
development are never realized.
Ahmad Sarosh Huda, Dept. of CS & IT, ILM College Sargodha
Organization by Product
• With this sort of organization, each division is likely to be headed
by a director; within the division, organization may well be by
function.
• It can also mean that good practice is slow to spread through the
organization.
• The tools of their trade are bar charts, activity networks, critical
path analysis.
• On the one hand, they are concerned with very short term problems,
such as the need to restart production as quickly as possible after a
breakdown.
• On the one hand, corporate managers are responsible for the long-
term strategy of the organization.
1. The state of the market for people with the same skills as the
person being reviewed.
2. The need to keep the salaries of employees with similar skills
and responsibilities broadly comparable across the company.
3. The profitability of the company.
Example:
• A division of a software company is flourishing; it has plenty of business
and its services are highly regarded by its customers. Unfortunately, its
profitability is very poor. Manager succeeds in increasing profitability
this by increasing the division’s charging rates and holding down salary
increases.
Ahmad Sarosh Huda, Dept. of CS & IT, ILM College Sargodha
Sub-optimization
• Sub-optimization is inevitable in very small organizations.