Fourth: The manufacturing or productive division.
These components lend themselves naturally to certain specific subdivisions; natural groups are formed to insure efficient management; certain authorities are delegated to effect economical operation.
The stockholders (owners) first elect from among their number, a board of directors. This is the initial step toward perfecting a business organization. The directors represent the stockholders, and the interest of the stockholder, as such, becomes that of an investor only. His interest in the operation of the business is to be looked after by the directors, whom he, or a majority, has elected.
From this board of directors is built the framework of the executive or managerial division. The first act of the directors is to meet and elect the usual executive officers: President, Vice-President, Secretary, and Treasurer. In modern organizations, it is customary to also elect or appoint an executive committee or board of managers.
This committee consists of three or more members, usually selected from the officers, to which may be added one or more directors who are not officers.
To this committee, the board of directors delegates its authority in the actual conduct of the business. This plan of electing an executive committee is particularly desirable when the board is a large one, as it concentrates authority and results in more prompt action on matters demanding immediate attention. A large body is unwieldy, a quorum cannot always be brought together on short notice, but a working majority of a small committee can be convened promptly.
The executive committee takes charge of both the commercial and manufacturing divisions. To still further concentrate authority, it is customary to appoint a General Manager who has direct supervision over the immediate operation of both commercial and manufacturing divisions. He is appointed sometimes by the executive committee, but more often by the board of directors.
The general manager, while occupying a position of chief acting executive, acts with the executive committee and is directly responsible to the board of directors.
The commercial division of a business naturally subdivides into two sections: Accounting, and Advertising and Sales. The first thought of the student might be that accounting is given a position of too great importance, but in the sense here used it means the records of the business of every nature, the accounts, the gathering and recording of statistics and information of every character.
The manufacturing division divides into Purchasing and Stores, and Production. In a measure, the purchasing of goods is a function of the commercial division, but the purchasing of raw material and supplies is properly under the supervision of the manufacturing division.