How to gradually perfect management organizational structure at Minh Hong Limited Company

ses) must prove strong and operate well. If the enterprises want to operate effectively, it will be important to set up a dynamic and reasonable management apparatus. Beside, it requires us to have a high level of knowledge and understand important role of management in each enterprise. Nowadays, with the requirements of the new era: while the commodity economy is facing fierce competitions, the enterprises management needs to be strong and dynamic enough to exist and develop. Therefore, it is important for the enterprises to establish a management organizational structure. This main task must be done not only by businesses but also by the entire society. In addition, there are different characteristics in an organization, in every economy and in every type of business. So, building a management organizational structure, which must to be different to suit the nature and the production level of each business, is necessary. From researching and studying documents on management organizational structure at Minh Hong Limited Company together with the help from the teachers of the English Department and specially Lecturer Tran Quang Nha, I have decided to choose my graduation theme as: “How to gradually perfect management organizational structure at Minh Hong Limited Company”. Apart from the introduction and conclusion, the Graduation Assignment consists of three chapters: Chapter1: Theoretical background of management organizational structure. Chapter2: Present situation of management organizational structure at Minh Hong Co., Ltd. Chapter3: Solutions suggested to perfecting management organizational structure at Minh Hong Co., Ltd. Chapter 1:THEORETICAL BACKGROUND OF MANAGEMENT ORGANIZATIONAL STRUCTURE I. Concepts. 1. What is organization? Organization is a basic function of management and corporate governance activities in particular. According to broadest sense, organization is a leading factor in the implementation of any activity, range from three to several social communities. This is one of the important tools of leadership and management to transform from the objectives into the reality. Work organization are understood and implemented by the following two specific meaning: firstly, organize a process that works (example: business activities). Secondly, organize a system of control apparatus (leadership, management). Here, we only mention the second issue, called: organizational management. There are many different definitions of organization, it is difficult to identify the most concise and accurate definition. Organization is a structure (an apparatus or apparatus system) which is intentionally constructed of the role and function (to be legalized). In which, its members carry out their assigned parts with the organic association in order to achieve common tasks. This is an organization definition which is close to the organizational management concept. 2. What is organizational structure? An organizational structure is a mainly hierarchical concept of subordination of entities that collaborate and contribute to serve one common aim. Organizational structure is an organization’s existence form which denotes the arrangement of parts of the organization and their relationships in that order. II. Enterprise’s management organizational structure. 1. Concepts. * What is management? The Oxford Dictionary, it is said that “management is the act of running and controlling a business or similar organization”. There is a relatively complete definition as follow: management is manager’s purposeful impact to subject who are managing; by a solutions system to change the subject’s state, to bring system to approach the final goal; to serve for human benefits. According to Peter Drucker’s view on management, a well-known American business professor and consultant, he suggested that the work of the manager must be done such as: planning (setting objectives), organizing, integrating (motivating and communicating), measuring, and developing people. * Enterprise’s management organizational structure is a combination of parts which constitutes the management apparatus and the relationships between those parts. 2. Requirements for the Enterprise’s management organizational structure. The rationality of a company which is expressed in these following requirements: * Optimality: Must be ensured between the stages and level of management which are setting a reasonable, dynamic relationship and serve business’ benefits. * Flexibility: Must be ensured for adaptability to any situation occurring in the system as well as outside the system. * Stability: This requirement seems to conflict with the flexibility, but it is important. Because, sustainability of organizational structures to ensure effective management and administration in normal situations. When arbitrary changes happened many times, it will cause negative consequence. * Reliability: All enterprise’s activities of administrating, coordinating and inspecting require accurate and timely information. Management organizational structure must ensure reliable information. * Economicalness: Management organizational structure for the lowest costs but the highest efficiency during construction and use process. 3. Meaning of management organizational structure. Management organizational structure is a form of division of labor in the fields of management, concerning the operation process and administration system. Management organizational structure not only reflects the production structure, but also positive effects of the development of production. Organizational structure allows us to organize and use reasonably the resources. It also allows us to determine the primary relationship among specific tasks, responsibilities and powers associated with these individual who are concerning. If an organizational structure wants to survive, it must be consistent with business’s economic, technique characteristics, business environment and be flexible to adapt to changes in Enterprise’s production and business process. A bulky, less flexible structure will make negative impacts to the entire enterprise’s business results. And, it must be replaced by the more comprehensive and flexible apparatus. III. Types of management organizational structure. Along with the development of production that formed many types of management organizational structure, each one has different characteristics, advantages and disadvantages and it is applied in specific, certain conditions. 1. Online structure. * Basic contents of the online structure are a ladder, which has many stairs. In which, Superior controls (determine, command, directly check) juniors and juniors must submit superior’s ideas. This is a mandatory control-submission relationship. * Advantages and disadvantages: - This is a simple and clear structure for the united command. This structure’s advantages are clear responsibility, and to maintain discipline and inspection. Leaders must take full responsibility for the junior’s activities, so can maintain the one-superior-in-charge regime. - It also has some disadvantages. When business applies this type of structure, Enterprise’s parts will have the distance and lack coordination. It makes difficulty to motivate staff’s creativity and attract professionals. 2. Functional structure. * The growth will require horizontally expanding. In which, each level of management must perform management function at each state with more complicated levels. So, managers need to have good knowledge, understand the situation and make the right decisions. Junior not only takes the leadership of a department function, but also takes the leadership of the business owners and other parts. * Advantages and disadvantages: - With relatively complex operation, the functional structure is more effectively than the online structure. Director himself doesn’t analyze all issues, monitor every company’s situation. But, it belongs to functional department’s tasks (experts and staff who has specialized knowledge of economic, technical, understanding of current institution related to business activities and have experience of situations). - However, functional structure makes management apparatus cumbersomely, bureaucracy prone director and unclear information. It makes staff lack a comprehensive vision and coordination in order to accomplish common goals. 3. Incorporate online-function structure. * Incorporate online-function structure is commonly applied in medium and large business. This is the combination of two types of relations: control-submission relationship and coordination-collaboration relationship. * Advantages and disadvantages: - This type of structure has exploited the advantages of the online structure and the functional structure. Before, Company’s director makes a decision on issues (which relate to the company’s mission); he is staffed by the functional department. It helps Director to clearly hold the company’s situation. Because, all of units in the company are guided directly by the board of directors, the company’s production and business are united. - But, this structure has revealed many weaknesses. There are many functional parts; they usually have to hold many meetings and it makes everybody to feel tired, stressful, waste of time. In addition, it also causes the internal conflicts company because of the inconsistent opinion. It doesn’t make staff. It makes the department unable to promote innovations and technical improvements and combine different departments. Director Diagram 1: Incorporate online-function structure in a product production enterprise. Vice Director Vice Director Function Staff Production Team Department Department 4. Divisional structure. * This is a kind of new structure which was consistent with the development of modern economy. It often applies for large corporate combinations to adapt to threats and opportunities outside. The company’s management apparatus is structured according to product, market and customer. * Advantages: - Allowing the company to have flexible adaptations in the work to meet to the needs of these operating groups outside the central and realize the changes around the area of operation. - Creating linkages with depth through specialization in the hierarchy of management systems. - Focusing on the success or failure of the products, services, customer or market specific. - Creating distinct business units; in which it allows this division to compete with the others. * Disadvantages: - Uneven development between branches can cause difficulties in the sharing of common resources. - Solving common problems could be coincidence between branches. - Slow development of product quality and services compared to competitors. - Although there is priority from the strength and resources of the entire company, but it is difficult to deal with the challenge of the whole company. - Not creating a common basis in training of high level and management experienced staff. - Having disperse tendency easily (excessive flexibility, weakening the unified management effectiveness). 5. Matrix structure. * Type of structure is combined by the functional structure and dividing sections by product, market. This structure has become increasingly popular in construction projects, aircraft manufacturing or software computer; in which, the developing coordination and diverse professional activities are required to unable resources easily to switch to other projects. * Advantages: - Combining the advantages of the functional structure and divisional structure. - Emphasizing on technical and market for organizations which are operating in complex environments. - Creating management staff that has capability to adapt to the technical field, marketing and personnel. * Disadvantages: - Very expensive because of many managements. - Each stage under the direction of the two centers. Unified concentrated operation’s effect is limited. - Powers and responsibilities of managers may overlap. Create easily problems and gaps in the department’s efforts, inconsistently. 6. Mixed type of structures. In the management practice, people often expect to have source division that to be able to balance each method’s advantages and disadvantages. It is necessary especially with the combination of large companies which trade in many high-technologies in their territories. Management apparatus is divided into branches. Each branch is organized under different structures for specific tasks and a separate legal unity, although it is monitored uniformly at the company. Chapter 2:PRESENT SITUATION OF MANAGEMENT ORGANIZATIONAL STRUCTURE AT MINH HONG CO., LTD I. Overview of Minh Hong Co., Ltd. 1. Establishment and development process of Minh Hong Co., Ltd. - The name of the company: Minh Hong Limited Company - Transaction name in brief: MH CO., LTD - Address: My Duc – Ha Noi - Tell: 034.3847153 - Tax code: 0100765718 - Fax: 034.3849153 - Year of establishment: April 10th, 2000 - Business license No: 052922 - Account number at My Duc Bank of Agriculture and Rural Development: 445071102812 Minh Hong Co., Ltd was set up on April 10th, 2000. The company has been an enterprise with legal status since the establishment. Company may use its own seal as prescribed by the State and organize business activities in accordance with regulations of the Socialist Republic of Vietnam. With the best effort, the company has existed and developed for many years. The development process of Minh Hong Co., Ltd may be divided into 2 periods as follows: The developmental process from 2000 to 2003. Minh Hong Company Limited was established in 2000 with legal capital of VND 1.5 billion. The company has met a lot of difficult things in the first period, such as: capital, labors, technology. About capital, which were loans from My Duc Bank of Agriculture and Rural Development and somewhere? At the beginning, they only had 25 employees and they had to recruit and train all new employees. Now, number of employee is continuously enhancing - 35 persons in 2002 and 50 persons in 2003. Although facing many difficulties, the company has turnover of VND 500 million in 2000, VND 670 million in 2001 and doubling in 2003 - VND 1.3 billion. The developmental process from 2003 to present. The company has invested another line of machines and modern equipments. Therefore, it makes their labor productivity triple and improves product quality. Stable activities of this line helped the company get profit and open a new orientation about production and business activities in the future. The company actively found out partners for joint venture and linking. Their products were appreciated and trusted. After 10 years of development, Minh Hong Co., Ltd always achieves all objectives at a rapid growth. The market of company also continuous expand, before 2003 the company focused on 2 primary markets: Hoa Binh and Ha Tay. But they are now providing goods for more than 10 the northern and the central provinces. 2. Functions and tasks of the company. According to established business decisions, Minh Hong Limited Company is operated by functions and tasks as follows: * Functions: - Production domestic animal feed - Procession of domestic animal feed supplement. - Distribution goods for wholesale agencies, retailer, large or small farm… * Tasks: MHC is a company specialized in manufacturing of domestic animal feeds. The company’s task is production completion and development for meeting the current raising needs. Company has promoted investment, expanded production, renewed equipment and applied new technology in order to improve productivity, product quality. They have been expanding gradually production scale, developing product and market distribution channels and advertising the company’s brand, which make the company to have a strong brand in the Red river delta region. The company continuously improves quality to protect the reputation with the slogan: “only gold quality” and carry out product development strategies to meet the diverse raising needs. They also ensure safety for workers, protect environment and observe the law, fully implement the rights of employees, and participate the public activities in the business process. 3. Features of the company’s product and the market share. * The company’s product: MHC is a company specialized in manufacturing of domestic animal feeds. They provide feed to pigs, chickens and ducks at each different stage of development. Having feeds for piglet from 5 kg to grow-up, domesticated bird and water bird... Looking at the data in Table 1, we see that Company’s product structure is diverse and rich. The product is manufactured as a condensed powder or tablets which are suitable for characteristics of each species and each stage of their development. There are two types of packaging – bag of 5 kilogram each and 25 kilogram each. Company’s products gained credibility in the market with good quality and reasonable price. Therefore, more and more clients come to the company. Table 1: Name some of the company’s products. Product Name Type Using subjects Type of bag MH 521 Condensed Sow 5kg/25kg MH600 Condensed Yellow Chicken 5kg/25kg MH1810 Condensed Porker from 5 kg to grow-up 25kg V70 Tablet Small Duck 25kg V72 Tablet Duck from 2 weeks old to grow-up 25kg VMH801 Tablet Small Chicken 25kg VNH802 Tablet Grow-up Chicken 25kg MH501 Condensed Porker 5kg/25kg (Resource of sales department) * The market share: Although, the company’s market is narrow and mainly in the North and the Central provinces, the turnover keeps rising because the company has gained more customers. Major clients of the company are wholesale agencies, retailer, small, medium and large farms. Company’s guideline shows that good productions isn’t enough to survival and develop, need to know the sales organization. Company has established a potential sales network which is a bridge between production and consumption. By way advertising, Company has signed many contracts. In 2007, only signed 89 contracts but more than 120 contracts was signed in 2008, 2009 with overall worth about VND 4 billions. But in it, there are a lot of small contracts. Specifically, the projects which provide feed for the mountainous districts of Hoa Binh province, the remote districts of Thanh Hoa province or some small farms in Ha Tay province. Diagram 2: Network of the Company’s product consumption Retailer Wholesaler Agency Retailer Consumer Manufacturer (Resource of sales department) In current years, domestic animal feed industry has developed with fierce competitions. More and more domestic animal feed has been imported from China. Although, company has improved many product designs and product qualities, the company’s product consumption has reduced. Finally, they must improve product quality, cut the good’s price in order to increase the competitiveness of companies in the market. 4. Results of the company’s business production activities from 2007 to 2009. Basis norms of the company’s business activities at table 2 are considered encouraging. They reflect a strong, stable and advanced growth. The company’s position has been strengthened. The turnover was worth VND 3.306 million in 2007 to VND 3.518 million in 2008, VND 212 million increase - equal to 6.41%. This is a good signal for the company. With increasing turnover, the company also must enhance more total capital. But, we can see that turnover’s annual growth rate is greater than total capital’s annual growth rate. In 2008 as compared to 2007, total capital increase is 5.68% which is lower than turnover by 6.41%. And it continuously increases when we compare the data in 2008 with that in 2009. Total capital only raises by 6.61% but turnover raises by 13.18%. It seems that the company has invested in the right direction and managed resources efficiently. Table 2: Results of the company’s business production activities from 2007 to2009 Year Norms Unit 2007 2008 2009 2008/2007 Comparison 2009/2008 Comparison Absolute number % Absolute number % Turnover Dong million 3306 3518 3982 212 6.41 464 13.18 Total capital Dong million 5542 5827 6212 315 5.68 385 6.61 Profit Dong million 315 340 420 25 7.9 80 23.5 Average Income Dong million 0.9 1.0 1.2 0.1 11.1 0.2 20 Number of employees person 46 53 70 7 15.2 17 32.1 (Resource of sales department) In 2007, the company’s profit is VND 315 million, VND 340 million in 2008. In 2009, growth rate increased by about 23.5% as compared with that in 2008. The company’s annual profits are re-invested. When the re-investment is efficient, the company’s profit is not only in these numbers. Number of the company’s employees is continuously growing year by year. Total workforce of the company - in 2008 as compared to 2007- increases by 7 people - equal to 15.2%. 2009 as compared to 2008, the company added more 17 people equal to 32.1%. In 2008 and 2009, the company has recruited more workers to positions at the offices and workshop. The number of the employees is increasing; each employee’s average income is also rising. An employee’s average income is VND 0.9 million in 2007, VND 1 million in 2008 and VND 1.2 million in 2009. Every year, the worker’s salary always rises timely in order to help them to meet with the increase of consumer price. II. Real situation of management organizational structure at Minh Hong Co., Ltd. 1. Management organizational structure at Minh Hong Co., Ltd. 1.1. Overview of Company’s management apparatus. Looking at the organizational chart of the company’s management, the company’s organizational structure was organized according to the online-function style. Director is the highest person at the company and he is assisted by two vice directors and the functional departments. The production part is workshop. Every part undertakes the different tasks and functions at the company. a. Management people. The company’s leadership includes 3 positions as follows: - Director: Director, who has the right to make decisions, is the highest executive in the company, the company’s legal representative and takes responsibility before the law for the company’s entire production business activities. He establishes business co-operation and production plans, development strategy, annual business plans. He builds and organizes appropriate management apparatus to deal with the needs of the company’s production business. Diagram 3: Structure of management organization at MHC Director Vice-director of technique Vice-director of business Planning Department Sales Dept. Administrative Department Technology Department Accounting-Finance Department Workshops - Vice director of business: Helping director to operate the company’s field of business, such as: consumer products, search market, business strategic planning…and responsible to report the Director the task performance which he is assigned. - Vice director of technique: managing and operating a number of areas of technique, science, technology and environment, labor protection, industrial hygiene, quality assurance. Helping the director carry out plans and directly supervises business activities at workshop. b. Functional Departments. There are 5 functional departments at the company: * Technology Department: - Organizational structure: including 2 persons. There are a senior clerk who is responsible for the material, labors productivity and product quality assurance. An employee who is a technician at the production teams, monitors supplies, machinery. - Functions and Tasks: Giving advices to Director, managing technical field, recommending the director technical solutions, regularly repair and assess product quality. Researching and creating new techniques and the optimal production process to enhance the production efficiency. They are responsible to guide workers about improvement and apply science to production. - The use of staff: There are 2 employees who are graduates from specialized technique course; suitable for its function. Number of employees is reasonable, but no one has university degree. - Department’s relationship: Coordinating with accounting department to set up prices, norms for consumable materials and liquidate material in excess. They must report to Technical Director and Director about the problems to be solved timely. This is a good management method to save fuel, reduce production cost. It helps to reduce cost to enhance company’s competition. * Planning Department - Organizational structure: including 3 persons. There is a senior clerk, a staff who is in charge of statistic and production temperate, a staff who will supply materials, entry raw materials into the warehouse to serve production process and also export raw materials for workshops. - Functions and Tasks: They work on designs, material reserve, cost estimates, the main and auxiliary material, purchase supplies, open management and monitoring book. General reports on production progress and implementation monthly, quarterly, six months, even years plan. - The use of staff: There are only 3 persons who have college degree. When the workload is too much, staff must work very hard and overtime. * Finance and Accounting Department - Organizational structure: including 3 persons who are arranged as follows: a senior clerk, a staff who gets the blame for price, wage payment, social insurance, payment materials and a staff who will pay Bank debts, hold cashier. - Functions and Tasks: They are in charge of the cash flow flexibility, timely, accurate. They are responsible for all things which are related to the bank: bank credit, periodic reports preparation, working with tax authorities, statistic, social insurance, and bank debt and the employee’s salary. - The use of staff: On the whole, the sort of staff position relatively fit to the department’s function and task. One staff has a university degree, and two staff who are graduates from a college. - Department’s relationship: On the basis of labor norms of the technical department, planning department, sales department, financial department to determine product prices, cost of raw materials, employee’s salary. They analyze profits and loss, and then they frequently report to the director. It makes the company to allocate production cost more reasonably. * Administrative Department - Organizational structure: There are 2 persons, a senior clerk and a staff. - Functions and Tasks: giving an advice to the Director on the company’s administrative organization, making proposals for arranging, organizing management apparatus, production organization, making inventory, handling internal, investigating and solving the employee’s complaints and letters of denunciations, doing paper work, office service. - The use of staff at the administrative department is reasonable. * Sales Department - Organizational structure: There are 5 persons, including: a senior clerk, two staffs who make short and long term business plans, sign business contracts, and carry out accounting business regime. Two staffs are business agents who search for new markets to sell the company’s product. - Functions and Tasks: to be in charge of setting up short - and - long - term business plans. They must report to director about turnover, cost, and transactions performed, purchasing negotiations and supply of raw materials, product consumption. Director will approve, monitor, check and evaluate the implementation results. Managing product which is sold through wholesale agencies and retailers - The use of staff: Sales department are run by 5 people, 2 people have graduated from university, 2 others have had college degrees, and one has graduated from vocational school. Arrangement of employees is not reasonable because of not much work to be done. They should transfer an employee to make clerical staff. c. Workshop. Foreman is responsible to director for all activities of the company’s production unit. There are 3 management staffs in the workshop. Including: Diagram 4: Management apparatus of the company's workshop Foreman Technician Statistic staff Taskmaster Production team No 2 Production team No 3 Production team No 1 - A foreman will base on the company’s production plan and co-ordinate with other departments in order to prepare the manufacturing conditions, such as: full materials and working clothes. Then, he needs to re-check to ensure facile work. - A taskmaster will co-ordinate all technicians operations to directly inspect and guide technically at the production and management of machinery, supply process. - A statistic staff helps foreman monitor number of daily labor and each labor’s productivity. This is the basis for pay salary and insurance for worker at the end of the month. 1.2. General Assessment: Relationship between levels in this system is the vertical relationship and this arrangement has advantages as follow: - Helping director understand the company’s activities - All departments of the company are directed by the Director, the company’s business production activities is united. - The board of management controls all company’s activities. Therefore, work quality’s assessment and inspection must take place clearly, equitable. - Enhancing the responsiblity of individuals because each level only performs the superior’s order. - The orders are implemented faster; it is easily to perform the one-superior-in-charge regime - This type of structure allows senior clerk may issue orders (which related professional) to the workshop, production teams. However, this structure has exposed some weaknesses as follows: Fi._.