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Organisational Structure of a Business

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  1. Organisational Structure of a Business

  2. Learning Objectives • Analyse the main features of an organisational chart, including levels of hierarchy, chain of command, span of control, flat and tall organisations • Identify why firms need to organise employees and analyse ways in which this is done

  3. Why do businesses need to be organised? • Small businesses (particularly sole traders) have an informal organisational structure • As a business gets bigger then it starts to form some kind of organisation and an organisation structure is required, this is a type of internal framework which shows how management is linked together and how authority is passed down • The structure determines: • Who is responsible for what job and • Who is responsible to whom.

  4. Hierarchy • Describes management structure of business • From top of company – managing director, through to shop floor worker • Usually best understood by drawing an organisation chart • Shows which levels of management and employees report to whom

  5. OrganisationStructure & Job Roles • Accountabilitytoyourbossor manager • Responsibilityforthepeoplewhoworkforyou • Whatdoesthe formal organisationstructure show? • Hierarchy CEO Board of Directors Managers Supervisors & Team OtherEmployees

  6. Hierarchical / Bureaucratic structure This is called a layer of the hierarchy

  7. Advantages Disadvantages This type of structure seems to suggest one way communication Managers often accused of tunnel vision • To highlight how decision making is done • Vertical departments can be based on anything not just departments • Role of each individual is clear and defined

  8. Span of Control • What is the Span of Control? • The number of people who report to one manager in a hierarchy • The more people under the control of one manager - the wider the span of control • Less means a narrower span of control • Example below shows a span of control of 4 for the Marketing Manager Marketing Manager Marketing Assistant Market Researcher Telesales Supervisor Customer Care Assistant

  9. Advantage of a Narrow Span of Control • Allows a manager to: • Communicate quickly with employees under them • Control employees more easily • Feedback of ideas from workers more effective • Requires a higher level of management skill

  10. Advantage of a Wide Span of Control • There are less layers of management to pass a message through • So the message reaches more employees faster • It costs less money to run a wider span of control because a business does not need to employ as many managers

  11. Organisation Charts We can use an organisation chart to show the levels of hierarchy and the span of control in a business How large is the MD’s span of control? How large is the Finance Manager’s span of control? How many levels of hierarchy are there?

  12. Tall and Flat Organisations • Tall organisation • Large number of managers • Narrow spans of control • Can suffer from having too many managers (expensive) • Decisions can take a long time to reach bottom of hierarchy • Can provide good opportunities for promotion • Manager does not have to spend so much time managing staff • Flat organisation • Few managers • Wide span of control

  13. Chain of Command • Line on which orders and decisions are passed down • From top of hierarchy to bottom Example Managing Director Production Director Production Manager Factory Supervisor Machine Operators

  14. Factors influencing organisational structure • Size of the business and number of employees • Style of leadership and culture of management • Retrenchment (Cutting down on the number of staff you have) • Corporate objectives • New technologies

  15. Task • Create an organisational structure diagram for all staff at the college. • It must include job titles & people´s names

  16. Another activity • Any business plc has a functional organisation structure. • The MD is responsible to a chair person and has a sales director, a finance director, a personnel director and a production director accountable to her. • On the production side there are a works manager, technicians, test engineers and machine operators. • In addition, the company employs 5 personnel assistants, 4 financial staff and 10 administrative staff and 20 sales people. • DRAW an organisation chart for Any Business plc from this information!