Organisational Structure of a Business

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.

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

Example of a Hierarchy

Customer Care Assistant 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

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

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

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

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

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

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

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

Main Departments in a Manufacturing Business Production Makes sure that production plans are met on time and products of right quality are produced Accounts Provides a detailed record of money coming in and going out of business Prepares accounts as a basis for financial decisions Sales and Marketing Sales - deals with all aspects of selling to customers Marketing - carries out market research, organises advertising and product promotion Purchasing Buys all raw materials and goods required for production Human Resources Deals with all recruitment, training, health and safety Handles pay negotiations with unions/workers