Organisational Structure of a Business

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Organisational Structure of a Business
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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.

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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

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Example of a Hierarchy
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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
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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

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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

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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

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Centralised Organisations

• What are they?
• Organisations where important decisions are taken
  at the centre 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

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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

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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
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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

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Main Departments in a Manufacturing Business