2.2.

1 Organisation structure

Titley pages 101 to 111

 Vocabulary
Organisational structure – how roles, responsibilities and
management authority are arranged in a business

Organisational chart – a diagram of the organisational

structure

Department – subdivision of a business that specialises in a

particular function or job

Hierarchy – the layers of management and command in a

firm

Chain of command – the line of management authority in a

hierarchical structure
 Vocabulary
Span of control – the number of subordinate staff a
manager supervises

Subordinate - a person under the authority or control

of another within an organization

Managing Director – most senior manager (CEO)

Tall structure – an organisation with a long chain of

command and relatively narrow spans of control

Flat structure - an organisation with a short chain of

command and relatively wide span of control
 Vocabulary
Centralized organisation – an organisation
whose authority, responsibility and
decision-making is concentrated at the top
of the chain of command.
Decentralized organisation – an
organisation whose authority, responsibility
and decision-making is delegated to lower
levels of the chain of command
Delegate - entrust (a task or responsibility)
to another person, typically one who is less
senior than oneself.
 Organisational structure
Sets out:
- Who specializes in what task?
- Who is in charge of whom?
- Who is responsible for making decisions?
- Who is responsible for carrying out these
decisions?
- How decisions and other information are
communicated.
 Organisational charts
Charts show:
- The different layers of management or
hierarchy.
- How many layers of management a person has
authority over called the chain of command
- The number of employees a manager is
responsible for called the span of control
- Delegation of tasks from senior management to
junior employees.
 How companies are organized
The goal of organisation is to find the structure that
works best for your company.

Many companies group people that d the same job

into the same place – called departments. This is
called functional structure, as people are arranged by
what they do.

When people are grouped with people doing the same

tasks it is easier for them to communicate, agree on
actions, monitor objectives and sole work-related
problems.
 Types of structure

- By key functions – like production,

sales, finance
- By product groups – cars, trucks,
motorbikes
- By customers – consumers,
professional, exports
- By location – North America, Asia,
Europe
 Roles and responsibilities
In most companies activities are dived up between
employees with different levels of authority.

They are split into:

Directors – elected by the shareholders to run the company

on their behalf usually with a specific responsibility like
finance or production

Managers – hired by directors to supervise or manage

activities, people or resources of the business.

Supervisors – the first management grade, junior managers.

Employees – general workers given specific tasks that are

managed or supervised by others within the company.
 Directors
Have a responsibility to shareholders and, often under law to

- Set business objectives, long-term plans and policies

- Monitor business performance and control activities
- Oversee financial decisions, safeguard shareholder funds,
prepare and publish accounts
- Decide on distribution of profits to shareholders
- Protect the firm from fraud and inefficiency

Large companies usually appoint a Managing Director (also

called CEO) whose duties include:

- Appoint senior manager to help run the business

- Devise and implement company policies
- Negotiate on behalf of the company with unions, suppliers
 Managers
Have the responsibility for:

- Carrying out the instruction of directors

- Setting objectives and allocating tasks to staff
- Motivating staff to increase productivity
- Monitor performance and appraise staff
- Identify training needs for staff
- Liaise with staff to discuss work related issues
- Manage budgets given by the finance department
- Writing reports for directors
 Supervisors & employees
Supervisors - often identified and promoted from within the
company due to their initiative and leadership qualities.

They often work with a small group of employees to provide

them guidance, training and discipline on a daily basis

Employees – supervised and managed by others to perform

tasks essential to the running of the company.

Can be skilled, semi-skilled or unskilled

 Organisational hierarchies
Refers to the layers of management and authority
within an organization.

There is no set correct way for firms to arrange

themselves, they do what they think is best for them.

Most opt for a hierarchical structure that looks like a

pyramid.
 Chain of command & span of control
The chain of command is the line of authority from the top
of the organisation down to the bottom.
The higher the person in the chain of command, the more
authority and responsibility they have.
The span of control is the number of direct subordinates
(those that are responsible to you) that a manager has.
The wider the span of control, the more employees a
manager has to look after.

Look at page 108, top left for a picture.

 Advantages and disadvantages
Good Bad
Clear management Communication up and
structure down can slow down
information
Individual roles and
responsibilities are clear Managers may not fuly
understand the roles of
Senior managers can workers beneath them
make all major decisions Junior mangers may feel
and control the firm isolated from decision
making, which restricts
their input.
 Tall or flat structure?
Organisation A Organisation B

Tall structure Flat / wide structure

Long chain of command Short chain of command

Short span of control Wide span of control

 Tall organisational structure
Advantages Disadvantages

• Managers have fewer • More managers = more cost

subordinates, so find it
easier to guide and control • Communication may be
them slow or difficult

• Managers and workers can • Descision making may be

specialise in their roles as slow due to the number of
they have fewer different layers information needs to
responsibilities. pass through
 Flat / wide structures
Advantages Disadvantages

• Quicker communication • Senior managers may

as there are fewer layers have less direct control
• Fewer managers = less over their subordinates
cost
• Senior managers are • Managers may have too
closer to employees and many subordinates
their problems
reporting to them to
• Wider roles mean they manage effectively
have more freedom to
make decisions and may
be more motivated as a
result.
 Flatter structures / delayering

More companies are choosing to widen

their structure by cutting down on layers
of middle management and bureaucracy
(excessively complicated administrative
procedure).

This saves costs and makes the remaining

employees feel more in control of their
work, and so more motivated.
 Centralized v decentralized
Centralised
• Authority, decision
making and
responsibility held in the
top of the chain of
command.
• Managers and workers
lower in the organisation
have very little say in the
running of the business.
Decentralised
• Authority, decision
making and responsibility
delegated down the chain
of command.
• Allows local knowledge to
be used
• Managers and workers
have increased say in how
their roles are performed,
“empowerment” – leading
to improved motivation.