Business Management: 2.2 Terms & Definitions

Accountability

Accountability

The extent to which a person is held responsible for the success or failure of a task, job, or project. It allows senior managers to have better control over the running of their organizations.

Bureaucracy

The administrative systems within an organization, such as the formal policies and procedures of the business. It includes the formal rules, regulations, and procedures of the organization.

Centralization

The situation where decision-making is predominantly made by a very small group of senior managers at the top of the organizational hierarchy

Chain of Command

The formal lines of authority in an organization. It can be seen via an organizational chart, which shows the formal path through which commands and decisions are communicated from senior managers to subordinates

Communication

The transfer of information from one entity to another. It is vital to how a business operates

Decentralization

The situation in an organization where decision-making authority is delegated throughout, rather from a central authoritative group

Delayering

This occurs when an organization removes one or more layers in its hierarchical structure, i.e., the number of layers of management is reduced, or made flatter

Delegation

The act of line managers entrusting and empowering employees with authority to successfully complete a particular task, project, or job role

Flat organization

Also known as a horizontal structure, this type of organizational structure has only a few layers of management

Flat structure

Type of organizational structure that has few levels in the organizational hierarchy.

Hierarchical (hierarchy)

A type of organizational structure that is tall/vertical, with many levels in terms of ranks

Levels of hierarchy

The number of layers of formal authority in an organization. It is represented in an organizational chart

Line manager

The person directly above an employee in the organizational structure of a business.

Managers

People responsible for the day-to-day running of the business or a department within the business

Matrix structure

A form of flexible organizational structure that uses teams of employees with suitable skills and qualifications drawn from different departments or divisions of the business

Organization by function

Structuring a workforce according to business functions, i.e., specialized roles or tasks

Organization by product

Structuring a workforce according to the goods or services sold. Each department focuses on a different product within the organization’s overall product portfolio

Organization by region

Structuring a workforce according to different geographical areas based on where the firm’s operations are

Organizational chart

A diagrammatic representation of an organization’s formal organizational structure

Organizational structure

The formal interrelationships and hierarchical arrangements within a firm

Outsourced workers (HL only)

Also known as outsourced vendors or the contractual fringe, these are the individuals or other organizations hired on a contract basis to carry out a specific but non-core role in Charles Handy’s Shamrock organization

Peripheral workers (HL only)

According to Charles Handy, these are the contingent workers, consisting of part-time and temporary staff hired by the organization

Professional core (HL only)

According to Charles Handy, these are the core workers consisting of full-time specialists who are vital for the organization’s operations and survival

Project-based organization (HL only)

This flexible organizational structure is based on the specific needs of a particular short-term or temporary project

Responsibility

Refers to a line manager’s level of concern in term of the people they are in charge of. An organization chart shows the breadth and depth of a person’s roles and responsibilities in the business

Shamrock organization (HL only)

Type of flexible organizational structure, coined by Charles Handy, advocating that organizations must adapt to changes in the business environment by having a core workforce, contingent workforce, and outsourced vendors

Span of control

Refers to how many workers are directly accountable to (or under the authority of) a particular line manager.

Tall organization

Also known as a vertical structure, this type of organizational structure has many layers in the organizational hierarchy

Tall structure

Type of organizational structure that has many levels of hierarchy, so the span of control is likely to be narrow.