Chapter 2 - Organizing Flashcards

1
Q

3 Elements of effective organization within the brokerage.

A
  1. Creating organizational structure.
    - decide which organization structure to use.
  2. Defining employee relationships.
    - clarify authority and responsibility.
  3. Establishing position descriptions.
    - title, purpose, primary responsibilities, and scope of position.
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2
Q

3 Forms of organizational structure

A
  1. Line organization
  2. Functional organization
  3. Line and staff organization
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3
Q

3 Advantages of line organization

A
  1. Simplicity
  2. Clear delegation of authority
  3. Quick decision making
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4
Q

3 Disadvantages of line organization

A
  1. Line managers must be fully knowledgeable in a wide range of areas for efficient decision making.
  2. Power concentrated at top, senior management makes all decisions.
  3. Limits employees growth by stifling innovation.
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5
Q

Line organization

A
  • Authority concentrated at top, flows vertically downward.
  • Responsibility flows upward.
  • Each subordinate has one person to report to.
  • Best suited for small brokerage where senior management personally directs activities.
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6
Q

Functional organization

A
  • Activies grouped together by function.
  • Departmentalized.
  • Departments are headed by specialists with authority over the area.
  • AKA Matrix System
  • Created to overcome weakness of line organization (ie. too many activities, too few managers)
  • Difficult to implement properly.
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7
Q

2 Advantages of functional organization

A
  1. Provides employees with expert advice.

2. Decisions made by management specialist.

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8
Q

3 Disadvantages of functional organization

A
  1. Employees have several bosses, resulting in conflicting instructions.
  2. Slow decision making.
  3. Too many managers distracts employees from serving clients.
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9
Q

Line and staff organization

A
  • Combines strengths of line/functional organization.

- Best suited for large corporations.

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10
Q

3 Advantages of line and staff organization

A
  1. Authority is clearly defined.
  2. Readily available expert advice results in quick decision making.
  3. Encourages co-operation and communication on all levels.
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11
Q

3 Legal forms of organization

A
  1. Sole propietorships.
  2. Partnerships.
  3. Corporations.
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12
Q

3 Advantages of sole proprietorship

A
  1. Right to all profits.
  2. Easy to start.
  3. Simple decision making.
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13
Q

3 Disadvantages of sole proprietorship

A
  1. All liability rests with owner.
  2. Expertise limited to owner.
  3. Business lives and dies with owner.
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14
Q

General or Limited Partnership.

A
  • General Partnership: all owners have same rights/obligations.
  • Limited Partnership: At least one general partner and one limited (silent) partner.
  • liability of silent partner is restricted to the amount of the investment.
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15
Q

4 Advantages of partnerships

A
  1. Broader expertise.
  2. Liability shared.
  3. Business carries on after death.
  4. Earning “all the profits”.
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16
Q

3 Disadvantages of partnerships

A
  1. More potential for conflict.
  2. Difficult to dissolve.
  3. Partnership agreements should be in place.
17
Q

2 Advantages of corporations

A
  1. Liability is limited to corporate asses only.

2. Tax advantages.

18
Q

3 Disadvantages of corporations

A
  1. Start-up fees.
  2. Legal fees.
  3. Income tax considerations - under greater scrutiny.
19
Q

Operating Affiliations are not legal forms. What are the four types?

A
  1. Loosely knit affiliations.
    - meet/discuss informally.
  2. General purpose groups.
    - formalized version of loosely knit.
  3. Clusters.
    - sharing “back room” services, maintaining ownership of book of business.
  4. Common identity groups.
20
Q

What would you consider before joining an operating affiliation?

A
  1. Services and support
  2. Exclusivity
  3. Fees
  4. Contractual agreement
  5. Financial strength
21
Q

Exclusivity - questions to ask.

A
  1. How many other brokerages in the area will be allowed to join?
  2. What is the legal nature, and how tight is the contract?
  3. What is the reputation of brokerages already part of the affiliation?
22
Q

Why should a lawyer review a contractual agreement?

A
  1. Determine responsibilities of the brokerage.

2. Determine benefits of the contract.

23
Q

Law of Agency

A

Rights and responsibilities that arise when one entity represents another.

24
Q

Types of authority

A
  1. Express authority.
    - written, clearly stated.
  2. Implied authority.
    - not stated.
  3. Apparent authority.
    - Perceived by third party.
25
Q

Sub-brokers

A
  1. Brokerage appoints individual to represent it.

2. Brokerage places business through another brokerage.

26
Q

What is ratification?

A

Retroactive approval.

27
Q

General purpose group

A
  • More formalized extension of loosely knit affiliation.
  • Often a fee to participate.
  • Provides resources like education, information, advice.
  • Non-competitive, non-threatening.
28
Q

Common Identity Group

A

-Gives participating brokerages an image and resources of national or international strength.

29
Q

Implied Authority

A

-Not stated in the contract, but law and custom permit other acts to be undertaken in conjunction with the express authority. (example: A brokerage uses an insurer logo in their advertising)