Download Organisational Structures

AS Business
Studies
People In Business: ORGANISATIONAL
STRUCTURES
Lesson Aims
• You will understand:– How issues such as levels of hierarchy, spans of control,
workloads, delegation and communication flows affect the
structure of the organisation.
– The roles that are carried out in the organisation by
directors, managers, team leaders and supervisors.
– How the structure of an organisation can affect the
performance of the business.
Key Terms
• Authority and responsibility: it is possible for a
manager to delegate authority to a subordinate.
However the responsibility must remain with the
manager.
• Organisation charts are diagrams representing the
job titles and formal patterns of authority and
responsibility in an organisation.
What is an Organisational
Structure?
• An organisational structure is the way in which a business is
arranged to carry out its activities.
• It sets out:
– The routes by which communication passes through the business
– Who has authority (and power) and responsibility within the
organisation
– The roles and titles of individual employees within the organisation
– The people to whom individuals are accountable and those for whom
they are responsible.
• Some entrepreneurs believe structures should be continually
changing to meet the demands of the rapidly changing
external environment. Changing the structure can help keep
costs down which is important to start-up businesses.
Key Elements in Organisational
Structures
• Workloads and Job Allocation
– Who is going to do what
– Good decisions in these areas help to make the business efficient
– As the small business grows the entrepreneur will focus on managing
the business and newly appointed employees will carry out more
basic duties.
– As the business grows further they will need to employ specialists, i.e.
Finance, I.T., Marketing. What are the benefits and costs?
– Increased Sales, Reduce costs, increase margins.
– Avoid times when employees are idle.
– Ensure workload is not too demanding as this would result in
mistakes, employee stress and ultimately dissatisfied customers.
– Links to part time, full time staff from Unit 1.
More Key Terms!
• Levels of hierarchy refer to the number of layers of authority
within an organisation. That is, how many levels exist
between the Chief Executive and a shop-floor employee.
• A span of control is the number of subordinates directly
responsible to a manager.
• The chain of command is the line of communication and
authority existing within a business. Thus, a shop-floor
worker reports to a supervisor, who is responsible to a
departmental manager, and so on.
Managing
Director (1)
Managers or
Team Leaders
(10)
Managing
Director (1)
Directors (3)
Managers (9)
100 Shop-floor workers
Supervisors (27)
Shop-floor
workers
(81)
A flat organisational structure has few levels
of hierarchy (3) and a wide span of control.
Many UK businesses have implemented
this form of organisational structure.
A traditional “tall” organisational structure
has five layers of hierarchy and a narrow
span of control. In spite of the firm
employing more people, it has fewer shopfloor employees that the “flat” structure
along side.
What do you think?
• Surveys of employees have shown that the majority
of people prefer to work in a “flat” organisation. Why
might this type of structure be particularly popular
with junior employees?
Spans of Control
• Wide span of control = Few levels of hierarchy
• Narrow span of control = Many levels of hierarchy
Manager A
Supervisor B
Worker D
Worker E
Wide Span of Control
•Employees gain greater
independence
•Motivation
Supervisor C
Worker F
Worker G
Worker H
Worker I
Narrow Span of Control
•Close Control over activities
Delegation
• Delegation is the passing of authority (but not responsibility)
down the organisation structure. Thus, a junior manager
might be given the authority to conduct a market research
campaign, but responsibility for the overall success of the
campaign is with the senior employee.
• Can you think of any recent high profile cases where senior
management have had to “carry the can”?
• Issues to consider:
– Experience
– Knowledge
- Finance within the small business
- Is the entrepreneur prepared to give
colleagues control?
Communication Exercise
• Chinese Whispers
• "It is rumoured that Mrs Jane Honoria Figglebat,
ward of the well-known boxing promoter Jem
Shambles, will next week try to break the
underwater swimming record for girls of English
extraction. Her fiancé Mr Wallaby, the animal dentist,
recently fitted seven new teeth to a zoo leopard
which had broken its jaw in a fight with a lion and
two llamas"
Communication Flows
• Communication is the exchange of information between 2 or
more parties.
• Communication flows up and down the organisation which
entails the passing of information from senior to junior
employees and from junior to senior employees.
• It also flows across the organisation. Well designed
structures offer employees at the same level the chance to
communicate effectively.
• Smooth communication encouraged if unnecessary levels of
hierarchy are removed.
• Communication improved is span of control is designed to fit
with employees abilities.
• Communication not just down to organisation structure:
– Use of IT
– Meetings and briefings
Centralisation & Decentralisation
• Centralisation:
– Where the majority of decisions are taken by senior
managers at the top of the structure.
– Rapid decision making: Few people consulted.
– Decisions linked to corporate objectives.
• Decentralisation:
– More decisions are made by employees lower down in the
organisational structure.
Workforce Roles
• What do these people do?
– Directors
– Managers
– Supervisors
– Team Leaders
Workforce Roles
• What do these people do?
– Directors: Proposed by Chief Executive, largely strategic, set and
oversee long term goals, may have expertise in particular area (i.e.
Marketing), Non-executive Directors give advice at board meetings.
– Managers: Planning, organising, motivating, controlling. Authority
over junior employees, plan and monitor short and medium term
goals.
– Supervisors: Represent link between managers and shop-floor
workers, Delegated authority for day to day decisions, line of
communication between managers and shop-floor.
– Team Leaders: Make less use of authority and are used in a role to
support shop-floor employees, facilitate work of junior employees,
must be trust at all levels.
How does Organisational Structure
affect business performance
• Keep a tight control on costs
– Allocate workload to make best use of labour costs.
– Improved communication from junior staff will help senior staff make
good decisions to use resources effectively.
– As organisations become flatter wage costs reduce allowing the
organisation to improve profit margins.
• Meet customers’ needs as fully as possible
– Increased motivation and improved decision making in junior staff is
likely to improve customer service leading to repeat business.
Particularly important for start-ups.
– Effective communication can also lead to improved customer service.
• Tricky to get the right balance in a small business when the
structure is evolving rapidly.
How did we get on?
• Do you understand:– How issues such as levels of hierarchy, spans of control,
workloads, delegation and communication flows affect the
structure of the organisation.
– The roles that are carried out in the organisation by
directors, managers, team leaders and supervisors.
– How the structure of an organisation can affect the
performance of the business.