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. 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

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