Business Management

1. Business Management Unit 1 1.3 How are Businesses Organised?

2. Unit 1.3 How are Businesses Organised? In this unit you will find out about: • Structures of a business – organisation charts • How the size of a business influences its structure • Line and lateral relationships • The functional areas of a business and how they operate • Marketing • Finance • Human Resource • Operations

3. What is an organisation chart? • An organisation chart can be used to • show the structure of an organisation or business and • how it is organised OBAN HIGH SCHOOL

4. Oban High School’s Organisation Chart: • Mr Bain is in charge of all staff in the school. • Mr MacPherson is the second in charge. He is responsible to Mr Bain and is in charge (responsible for) the other 4 Deputes. • The 4 boxes on the same line show that Mrs Leitch, Mr Mitchell and Mrs Lawson all have the same level of responsibility, and are responsible to Mr MacPherson and Mr Bain.

5. ABC PLC ORGANISATION CHART

6. Lateral and Line Relationships LINE RELATIONSHIPS: This refers to the links between bosses and the people who work for them. These lines tend to be vertical – up and down the organisation chart. LATERAL RELATIONSHIPS: This refers to the relationships between people on the same level in the chart and who have the same level of responsibility. These lines go across the chart

7. Organisation chart for Britesparks Department Store Line Relation- ship Lateral Relationship

8. What is the Chain of Command? • The chain of command refers to the lines of communications downwards and upwards from and to each of level of management. For example the way an instruction would be passed from the store manager, to the assistant manager to the Toy department manager.

9. What is the Span of Control • Span of control refers to the number of people a manager or supervisor has authority over and is responsible for. Credit

10. Span of Control Wide span of control Maths Dept Credit Business Technologies Dept Narrow span of control

11. Narrow Span of Control • Where managers or supervisors are responsible for a small number of people. Credit • The Sales Manager is responsible for 2 Sales Supervisors and each Supervisor is responsible for 2 salesmen.

12. Narrow Span of Control

13. Wide Span of Control • Exists where each manager/supervisor is responsible for a larger number of people. Credit

14. Wide Span of Control Credit only

15. What is a Tall Structure of management • Tall management structures have many levels of management • Managers have a narrow span of control – they supervise a small number of staff. • They have authority over a small number of staff • Employees may not be able to show initiative • Communication between levels can take a long time

16. Example of a Tall Structure

17. What is a Flat Management Structure? • Flat management structures have fewer levels of management • Managers have a wide span of control – they supervise a large number number of staff. • They have authority over a large number of staff • Employees have the opportunity to show initiative • Communication between levels is quicker

18. Example of Flat Management Structure

19. Tall Structures

20. Flat Structure

21. TALL STRUCTURES Army Police Hospital Government FLAT STRUCTURES Bus Company Employment Agency Farm Charitable organisation EXAMPLES OF TALL AND FLAT ORGANISTION STRUCTURES

22. Why Organisations may change Downsizing – organisation gets smaller Growth – organisation gets bigger Credit only Delayering – remove layers of management Outsourcing – buy in necessary services

23. Why Restructure? Many modern organisations change from a TALL to a FLAT structure – known as DELAYERING • Enables faster communication up and down through the levels of the organisation • Enables faster decision making – fewer levels of management to consult • More responsibility given to junior members of staff – less likely to get “stale” • Reduction in staffing costs – fewer levels of highly-paid managers. Credit only

24. Why Restructure? Many modern organisations OUTSOURCE a service, ie pay an outside company to provide a service instead of using their own staff … Credit only Cleaning Catering Security Copying

25. Organisation Restructuring • Organisations often change their structure to improve their efficiency • Or due to business expansion or contraction • This can involve relocating to different offices • It could also involve staff redundancies Credit only

26. Possible benefits To reduce costs To become more efficient To delegate tasks to other departments To contract-out key activities eg cleaning To improve communications within the organisation Possible problems Low staff morale Staff may not want the change Cost of restructuring – new departments Initial communication problems – who is in charge of who Customers may be unfamiliar with the new structure Restructuring Credit only

27. Responsibility means being answerable for actions and decisions taken by oneself and/or others. Most people have some responsibility, but it does not mean that they have authority. Authority means having the power/right to take certain actions and to delegate work to others. It also means having authority over staff. People with authority always have responsibility. Responsibility V Authority Credit only

28. Types of Decision Making Decision-makers have different levels of authority • Strategic Long-term decisions which help to achieve the organisations aims and objectives – taken by highest level • Tactical These are medium-term decisions which help achieve the longer-term decisions – taken by middle management • Operational These are the day-to-day decisions – taken at the lowest level.

29. FUNCTIONAL AREAS OF A BUSINESS The four functional departments found in a business are:

30. Functional Areas of Business Marketing: These are methods used to create an awareness of the product and selling it at a price which covers costs for the business. The price is one which customers are able and willing to pay, while satisfying needs and wants.

31. Functional Areas of Business Human Resources Department which deals with • Recruiting staff • Training • Industrial relations

32. Functional Areas of Business Operations (Production): This department deals with • Design • Production and • Distribution of the company’s goods

33. Example of Operations STAGE Making Shoes Offering an Insurance Policy Cut leather Customer query 1 2 Stitch together Find details 3 Add sole Provide quote 4 Package Complete forms 5 Store in warehouse Receive payment 6 Deliver to customer Issue Policy Whether you offer a good or a service you must follow a number of stages. This is called the OPERATIONS FUNCTION.

34. Admin Department offers admin support to the whole business: Filing Reception Switchboard Photocopying word processing ICT department offers ICT support to the whole business: Maintain computer systems Buy hardware and software Set up staff passwords and usernames Set up computer security Functional Areas of Business

35. Functional relationships exists between departments When one department offers a direct service to other departments it is said to have a functional relationships with that department. Departments and individuals co-operate to help the business achieve its overall aims and objectives. Credit only

36. Examples of Functional Relationships Functional Relationships are about how functional departments work together and how they support the work of the organisation. Credit only

37. Foundation Organisation charts 4 Functional areas: Marketing Finance Operations Human Resources General Tall and flat structures Advantages and disadvantages of both Why organisations may restructure Line relationships Credit Span of control Advantages and disadvantages of different spans of control Functional relationships Responsibility and authority You need to know …