Case 1: TSAR NICHOLAS TRADING and FINANCING: Let It Be Me

The business established by Mr. Eduardo Nicolas started small but

within 20 years, it grew into an appliance trading and financing enterprise
with 60 branches manned by about 2,000 employees.

Mr. Nicolas believes that the spoken word is more powerful than the
written means, and he speaks directly with any of his subordinates for
whatever he wants to communicate. His business is effectively a single
proprietorship, and as such, he decides on issues whether major or minor.

Mr. Nicolas stays close to the five senior managers who comprise his
operations team. He meets him at least once a month and talks to any of
them every now and then through the medium of cell phone. These
managers report directly to him. An executive assistant helps him in various
requirements of his job, including coordinating the activities of the senior
managers.

The business consistently maintains an informal approach in the

management of its activities. No clearly defined units are introduced unless
they are deemed to be absolutely necessary. The current organizational
structure consists of the following:

1. A legal office headed by the legal officer and assisted by seven

employees.
2. Accounting department, auditing department, and finance
department with a total personnel complement of 208 employees.
All three departments are manage by the comptroller.
3. Treasury department with 199 employees headed by the company
treasurer. Attached to this department are the auxiliary units like
security and housekeeping.

Each branch maintains its own sales unit but there is no marketing
department at higher level to oversee the sales activities of all the branches.

The head of the various departments situated in the head office, the
five senior managers, and the 60 branch managers are responsible for
recruiting and training employees at their respective units. There is no central
HR department to oversee such activities. Recruitment and trainings are done
with minimal paperwork. Employees are hired without the benefit of job
descriptions and job specifications. Communication is mostly verbal.

The structure adapted by the firm has produced god good results,
however. This organizational approach is responsible for making the company
grow from a single branch operation to its present status. The companys
operations are generally regarded as profitable.
 Employee turnover reach an average of 30% but Mr. Nicolas is not
much concerned because of the sufficient number of applicants applying for
work in the company.

Questions:
1. What do you think of the organizational structure of the firm?
2. What difficulties may be anticipated if the current structure is
maintained?

ANSWERS:

1. What do you think of the organizational structure of the firm?

In this case, Mr. Eduardo Nicholass approach to management is informal. Hes

maintaining an informal organizational structure and gladly doesnt encounter much of a
problem. Informal organizational structure includes the business activities and even the
manner of recruiting and hiring employees. In the informal organizational structure,
individuals are assigned into various job positions. While employees are working on their
job positions, they interact with each other and develop some social and friendly groups
in the organization. Thus, this network forms another structure in the organization which
is called informal organizational structure. The informal organizational structure in this
case can be easily created automatically for the main purpose of getting psychological
satisfaction especially for doing things what Mr. Nicholas believed that was right. The
existence of this informal structure depends upon the management style of the company.
Hence, it also depends upon the perceived formal structure because people working at
different job positions interact with each other to form informal structure.

2. What difficulties may be anticipated if the current structure is maintained?

Departmental Conflict- in an informal organizational structure conflicts and

power struggles occur when deadlines and budgets cause a competition against
departments.
Inconsistency- when each department functions independently, inconsistency
may result. Company policies and procedures may not be enforced, causing employee
dissension and confusion. Employees who transition to other jobs in the company run
into problems when they behave as they did in their old roles. Approvals take longer
because no one knows who is in charge when multiple departments interact. For example,
if some customers complain that no one responds to problems, a small business can
restructure support so each customer gets paired with a company representative.
Poor Communication- As a small business grows, organizational structures that
worked before no longer function productively. For example, relying on informal
meetings for planning tends to become less effective. Lack of structure or an inflexible
structure can impede the work force from achieving desired results. Additionally, poor
communication among department leaders could filter down into the rest of the
organization. Establishing good communication mechanisms -- such as print, email and
presentations -- alleviates organizational problems that stem from rapid growth.
Implementing good project management practices can also formalize procedures that
ensure good communication.
Unclear Goals- To enable agility, each organization may set its own goals. This
minimizes the levels of approval. However, when each department sets its own goals, the
whole company lacks a cohesive direction. Infighting results when limited resources must
be shared. Setting a clear company strategy and having each department align its
individual goals to the company's helps minimize the problems.