Organisation structures

Formal organisation This is the internal structure of a business — the way in which human resources are organised. It takes into account: —the relationships between individuals —who is in charge —who has authority to make decisions —who carries out decisions —how information is communicate

Organisation structures Span of control The number of people who directly report to one manager in a hierarchy. The more people under the control of one manager, the wider the span of control. Less people means a narrower span of control. The example below would have a span of control of four people. David Cameron George OsborneTheresa MayMichael GoveNicky Morgan

Organisation structures Chain of command Line in which orders and decisions are passed down from the top of the hierarchy to the bottom e.g. David Cameron George Osborne Junior Treasury minister Civil servant

Organisation structures Flat structures (1) These have a few layers and a wider span of control. Advantages  Vertical communication is often quicker.  It costs less money to run a wider span of control because a business does not need to employ as many managers on higher salaries.  Workers are more motivated as they benefit from job enrichment.

Organisation structures Flat structures (2) Disadvantages  Not much opportunity for promotion. Workers will receive the skills required for these managerial positions but will get frustrated with the promotional opportunities available, which can lead to a high labour turnover.  Difficult and time consuming for managers to control so many workers.

Organisation structures Tall structures (1) Lots of layers and often a narrow span of control. Advantages  More opportunity for promotion, as more layers within the business.  Quicker horizontal communication.  Closer supervision of workers and fewer mistakes.

Organisation structures Tall structures (2) Disadvantages  Vertical communication can become difficult and lead to poor motivation of subordinates.  Costly, as there are lots of managers.  Poor motivation, as little delegation occurs.

Organisation structures Delegation To give somebody the authority to perform a particular task. It is important to note that it is the authority to do the task that is delegated and not the final responsibility, i.e. if the job is done badly the manager will still need to accept responsibility. Student question How does delegation link to leadership styles?

Organisation structures Business structures (1) Centralisation  Managers keep control.  Simple to understand.  Not much responsibility for staff but fewer mistakes.  Costs can be cut by standardising purchasing etc.  Strong leadership.

Organisation structures Business structures (2) Decentralisation  Empowering and motivating.  Freeing up senior managers’ time.  Better knowledge of those closer to customers.  Good staff development.

Organisation structures Types of business structure 1.Entrepreneurial — decisions made centrally. 2.Pyramid/hierarchical — staff have a role; shared decision making; specialisation is possible. 3.Matrix — staff with specific skills join project teams; individuals have responsibility. 4.Independent — seen in professions where organisation provides support systems and little else.

Organisation structures Decisions can be made quickly in this structure All decisions made centrally Great reliance on key workers supporting decision makers Few decisions made collectively Decision maker Key worker Entrepreneurial

Organisation structures Decisions pass down from managers to staff Information flows up from staff to management This is the traditional structure — there is specialisation of tasks e.g. finance, production, sales, marketing etc. Decision making is shared throughout the business Pyramid

Organisation structures MarketingProductionFinance Project A Project B Project teams created Staff with specialist skills Emphasises getting people with specialist skills together into project teams. Individuals within the team have their own responsibilities. Supports Theory Y type managers. Workers are organised based on their expertise Matrix

Organisation structures  Matrix is the best way of organising people, as it is based on skills and expertise.  Matrix gives more delegation.  Matrix fits in with theory Y managers  Pyramid is argued to be more theory X.  Matrix needs expensive support systems. It is costly to run separate project teams.  Might be difficult to coordinate teams from different departments. Evaluation: it often depends on the business e.g. matrix structure complements a magazine business, might not be ideal in a clothes factory. Matrix vs pyramid