PLANNING, ORGANIZATION AND MANAGEMENT
The life span and success of any business depends on the persons that manage it. It is the way the manager handles his assignment that will determine the success or failure of the business. For instance, a business with a systematic approach in managing its resources will survive no matter the business climate. But an industry, irrespective of its size, without a systematic plan for its continued existence will fall within a short period of time.
Therefore, planning is very important because it is the gateway to success. Planning in this context is the act of deciding in advance what to do, how to do it, and where to do it.
In a nutshell, project promoters should realize that planning, which is a sine qua non to the success of any business, is a rational approach to the future. It involves choosing between the possible courses of action to be taken in the future either in the short run or long run. Planning, also involves setting of objectives and deciding how to reach them. However, after planning and forecasting, the next step is to organize the proposed industry so as to bring the plan into action. For this purpose, an organization structure must be designed, the roles and responsibility of individual staff determined and the line of authority established.
The basic nature of an organization is evident from the definition which means to create or constitute a group, business or association of interdependent parts, giving each a specific contribution and relationship to the whole. An organization is also defined as a strategy for achieving a specified result. It is evident from the above definition that the principal objective of an organization is to survive, to generate profits and compensate its owners for using their resources or equity contribution in undertaking the venture. To this end, the project must produce and sell and cater to the demand of its consumers.
FORMAL AND INFORMAL ORGANISATION
Our definition of an organization is not complete without an understanding of the difference between a formal and informal organization. Formal organization is defined as coordinated activities of a group of two or more persons working consciously and cooperatively towards a common goal. On the other hand, an informal organization is any joint personal activity without conscious joint purpose. Though these persons may be contributing to joint result, the informal organization relationships are not modified or reflected on an organization chart.
However, our concern is the nature of a formal organization in the form of small, medium and large enterprises. The formal organization is therefore conceived when there is a structure of roles. For this purpose, formal organization is usually depicted in the organization charts. The chart indicates the different functions to be performed and how each of these functions relate to one another. Thus, the organization chart not only indicates the relationship among the functional groups, but also the levels of authority and the flow of such authority. In doing this, the organization must indicate the lines of communication as they flow from one function to another whether vertically or horizontally. A typical formal business organization distinguishes sales, production, finance, accounting, credit, personnel and other such specialized tasks. But while conceiving the various functional departments and that tasks to be accomplished, promoters should also understand that cooperation among the functional grouping is important for attaining the proposed organizational objectives.
To make people work as a team, the project sponsors should recognize the motivating force which makes or induces employees to act one way or another. One way of doing this is to establish some basic principles for the proposed organization during the project formulation stage. These principles should define the company’s policies and objectives, establish the structures and define the authority and responsibility. The policies and objectives should be clearly defined including the methods for achieving them. This will help the project sponsors to determine what type of organization is needed. The organization structure must have some flexibility for possible change of policy or circumstances due to expansion, diversification, backward or forward integration in the future. Most importantly, the responsibility attached to any position should be clearly defined and the necessary authority for carrying out such responsibility given.
POLICIES AND OBJECTIVES
As indicated earlier, there is a close relationship between policies and objectives. Generally, policies are considered to be long term, but if circumstances change, there may be need for policy to be adjusted. On the other hand, objectives can be both long term and short term. All objectives should be closely related to the defined policy of the proposed business and as much as possible present the immediate and long term actions needed to enable the project to progress towards effective operation at the implementation stage within the framework of the established policy.
The following are some of the items to which specific objectives might be set by the promoters:
a) Financial Objectives.
• Profit, expressed as a percentage of: the turnover, capital employed, equity contribution.
• Statement of the minimum annual return of shareholders.
• Statement of the required minimum level of working, capital to be maintained at all times.
• Statement of additional finance to be provided by the promoters and external investors for the acquisition/improvement of plant and machinery before and during the operational stage.
b) Marketing/ Sales Objectives.
• Achievement of specific levels of sales in respect of products and other services.
• The proposed company’s share of the market.
• The quantity and quality of the product or services including the product mix being proposed.
c) Personal Objectives.
A clearly defined target in respect of the employment and training of skilled and unskilled personnel including the provision of certain social and related benefits.
d) Production Objectives
• A projected level of production outputs in respect of departments , products or product groups.
• A projected level of product mix taking into consideration seasonal variations of one product to be compensated by those of another.
• Specific action in project formulation towards achieving specified levels of utilization of equipment and labor force.
The above information should be provided in the various sections of the feasibility study.
In designing an organization structure, attention should be given to two main requirements by the project sponsors. These include:
a) A statement of the responsibilities of the management, supervisory and specialist functions of the proposed organization.
b) The formal relationship which the individuals that will perform these functions are required to have in order to achieve the proposed objectives of the company.
However, it should be clearly understood that the organization chart is simply a visual presentation of the functions and relationships. Therefore, such a chart needs to be supported by detailed job description and overall functional description in the feasibility study.
As stated above, there is no right or wrong organization structure. It is not possible to lay down an ideal board in all organizations. However, experience has shown that while certain principles apply, almost every organization has certain features which are specific to that organization. It is strongly recommended that no attempt should be made by a consultant or project promoters top establish a standard structure. On the other hand, by examining basic principles which are well elaborated in management textbooks, it may be Possible to prepare a model which could serve as a basis for the development of a company’s organization chart. An organization chart will be simple or complex depending upon the size and nature of the proposed organization. At each level of management, there are specific roles and responsibilities expected to be performed by the key employees. Specifically, the chain of command for each level of management and staff shows that:
a) The Board of Directors are expected to formulate policies and guidelines for attaining the proposed industry objectives.
b) The top management is to ensure that the company is managed by the stated policies to accomplish its objectives.
c) The supervisors must ensure that plans made by top management is put into concrete action and also ensure that subordinates carry out their duties and accomplish them.
d) The middle management is to direct the implementation of the business objectives.
e) The employees should comply with the set objectives, rules and regulations.
In summary, when designing the organization structure, project promoter should recognize that the highest hierarchy of management plays a pertinent role and delegate’s authority and responsibilities to subordinates at other levels.
RELATIONSHIP WITH SHAREHOLDERS AND BOARD OF DIRECTORS
In most small and medium enterprises, the ownership and control of the business is usually vested in two or more persons who are the major shareholders. It is from among the shareholders that the chief promoter is appointed as the Chairman and Managing Director. One or more of the directors may also hold substantive position in the proposed business depending on his contribution, his closeness to the chief promoter or knowledge of the proposed business. However, institutional investors are not usually favorably disposed to such an arrangement. It may therefore be necessary for promoters to source for other partners who are non- family members to inject additional capital or expertise into the business. This will engender the necessary confidence by external investors to provide additional support in form of equity and loan for the business.
MANAGEMENT AND STAFF JOB DESCRIPTIONS
In formulating an industrial project, every managerial, supervisory and staff positions should be defined clearly and precisely. A good management job description informs the person to be recruited and others about what the person is supposed to do and what authority needs to be delegated to him to enable him perform his job properly.
For this purpose, a job description should state the basic function of the position, the major duties, the scope of authority, internal and external relationships and key responsibilities. It is not normally necessary for a job description to incorporate very detailed list of specific duties related to the position. Within the framework of a given organization chart, a job description will normally stand as long as the basic structure of the proposed organization remains unchanged. However, as explained earlier, in order to produce a job description, it is necessary to have an organization chart.
The main elements of a job description include:
a) Title: A clear title for the job.
b)Function: A brief statement explaining the functions of the person(s) that will do the job.
• Who will he report to?
• Who will he coordinate within the organization?
• Who are his subordinates?
• Any other external relationships?
d) Responsibilities: a clear itemized statement of responsibilities in relation to the conduct of the job, finance, property of the company, control, etc.
To be effective, a business organization must have loyal, intelligent, competent and enthusiastic employees. However, in project formulation and implementation, this generally is a neglected aspect of policy development. It is therefore important for project promoters to give a close and careful thought to their employment policy, because it is on this that the future and long term sustainability and success of the company will depend. To achieve these objectives, particular attention should be paid to personnel selection, training, remuneration, employment benefits and morale.
a) Personnel Selection and Training.
From the onset, very clear standards for the selection and training of personnel need to be laid down. In most small and medium enterprises, employees are recruited more because of their personal relationship to the promoters than the required competence to do the job. It is suggested that a policy should be adopted under which the requirements are clearly determined and stated.
During the implementation stage, those concerned with the staff recruitment should follow the company’s policy and justify the action that they take. Policy formulated in this respect should be clear that little opportunity exists for its abuse. Project promoters should also design training programs in consultation with experts for re-skilling and retooling their employees for optimal performance.
When deciding how to remunerate the employees, promoters should take into consideration the best management practices in the industry. However, whatever the level of remuneration, decision should be made on whether it is going to be in form of wages and salary only or whether other types of remuneration such as profit sharing. Incentive bonuses, etc. are going to be introduced at a later stage. A clear policy on these matters should be made to serve as a guide during the project implementation stage.
c) Employment benefits and morale.
The proposed business should also have a policy in relation to social benefits and terms of employment. Such policy should address issues including vacations, sick leave, leave of absence for other reasons, retirement policy, working conditions, insurance, medical facilities and so on. Many of these may not apply to the business which is new, but If the business expands and is very successful, they certainly will become very important.