Fair Sized Business

The fair sized business is distinguished from the small business in two ways. In the first place the top operating job becomes a fulltime assignment. And the overall business can no longer be set by the man who holds the top operating job. Setting objectives may indeed still be carried on as a part time job; the treasurer, for instance, may handle it in addition to his financial duties. But it is usually better in the fair-sized business to organize objective setting as a separate function to be discharged, for instance, by the functional managers meeting regularly as a planning committee.

The fair sized business therefore always has to have a chief executive team. It always has a problem of the relationship of functional managers reporting to top management.

It is this stage that a decision has to be made concerning which of the principles of organization structure apply. The small business is, as a rule, is organized functionally; and there is no difficulty in meeting the requirement that functional managers report directly to the manager of a genuine business. In the fair-sized business the federal principle of organization becomes both applicable and advantageous.

Finally, in the fair-sized business we encounter for the first time the problem of organizing technical specialists. Staff services by and large are still unknown (with the exception perhaps of a personnel department). But technical specialists are needed in many areas. Their relationship to functional and top management and the objectives of the business therefore have to be thought through.

The next stage is the large business. Its characteristic is that either one or the other of the chief executive jobs has to be organized on a team basis. Either the top action job or the job setting over all objectives is too big for one man and has to be split. Sometimes one job becomes a full time job for one man and a part time job for several other people.

There may, for instance, be a president who is full time chief action executive. But both the manufacturing vice president and sales vice-president may spend a considerable part of their time as top action officers in addition to their functional duties. Similarly, there may be an executive vice-president concerned full time with over all objectives. The chairman of the Board, semi retired from active executive office, may spend practically full time on objectives. At the same time the company’s treasurer, its chief engineer and its personnel vice president may all spend a large part of their time on setting objectives for the company.

In the large business the federal principle of management organization is always the better one. In most large businesses it is the only satisfactory one. This raises a problem of the relationship between top management and the autonomous managers of federal businesses.

The last stage of business size is the very large business. It is characterized first by the fact that both the action and the over all objective setting part of the chief executive job must be organized on a team basis. And each job requires the full time services of several people. Secondly, it can only be organized on the federal principles of management structure. The business is too big and too complex to be organized another way. Finally, the organization of the chief executive and its relationship to operating management tend to become major problems which engage the attention and energy of top management people before everything else. It is in the very large business that systematic organization of the chief executive job is both most difficult and most needed.