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Organisational Structure of a Business

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  1. Organisational Structure of a Business

  2. 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 • An organisation structure is required as soon as there are several people working in the business • The structure determines: • Who is responsible for what job and • Who is responsible to whom.

  3. 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

  4. Example of a Hierarchy

  5. 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

  6. 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

  7. 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

  8. 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

  9. Centralised Organisations • What are they? • Organisations where important decisions are taken at the top and then passed out to the various departments / locations • Advantages • Tight control of decisions • Decisions made by senior management • Helps decisions to be consistent across the business • Avoids repetition of functions (e.g. only one purchasing department) • Disadvantages • Lack of motivation for managers • Central management may be “out of touch” • May be slow to make decisions that need to taken quickly

  10. De-Centralised Organisations • What are they? • Organisations where important decisions are delegated to managers in other departments / locations • Advantages • Increased motivation of managers • Encourages local initiatives • Decisions based on more up-to-date information • Decisions made quicker • Disadvantages • Managers may lack experience • Local decisions may be inconsistent with the overall business aims and objectives • Duplication of functions and costs

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

  12. Importance of Effective Delegation • Delegation is giving authority for certain decisions to those below manager • Gives manager more time to work on other aspects of business • Also plays an important part in increasing job satisfaction and motivation of employees