Organisation Structure & Employees Notes

Learning Objectives

  • Understand organisational charts for different types of businesses: hierarchical and flat, centralized and decentralized.
  • Understand the roles and responsibilities of employees in terms of compliance and accountability: span of control, chain of command, and delegation.

Organisational Charts

  • Running a business requires planning, decision-making, coordination, and communication.
  • These tasks are easier if workers are organized into a structure made up of different functions/departments.
  • The internal structure of a business is known as ‘the formal organisation’ – this can be represented in an organisational chart.

What Organisational Charts Show

  • How the business is split into functions/departments.
  • The roles of employees and their job titles.
  • Who has responsibility.
  • To whom are they accountable.
  • Communication channels.
  • The relationship between different positions in the business.

Hierarchy

  • Describes the management structure of a business.
  • From the top of the company (managing director) through to the shop floor worker.
  • Usually best understood by drawing an organisation chart.
  • Shows which levels of management and employees report to whom.

Employee Roles and Responsibilities

  • Directors: Appointed by owners to run the business – form the board of directors – make all important decisions.
  • Managers: Their role is to achieve the objectives of the owner – responsible for planning, controlling, organizing, motivating, problem-solving, & decision making.
  • Supervisors: Monitor work in a particular area.
  • Operatives: Skilled workers – in the production process – operate machinery.
  • General staff: No specific skills – trained to do a task – e.g., accounts clerks.
  • Professional staff: Skilled & highly trained – e.g., doctors, lawyers.

Features of Organisational Structures

  • Chain of Command
  • Span of Control
  • Flat and Tall (hierarchical) structures
  • Delegation

Chain of Command

  • The line on which orders and decisions are passed down.
  • From the top of the hierarchy to the bottom:
    • Managing Director → Production Director → Production Manager → Factory Supervisor → Machine Operator

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.

Advantages 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 is more effective.
  • Requires a higher level of management skill.

Advantages of a Wide Span of Control

  • There are fewer 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.

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 the bottom of the hierarchy
    • Can provide good opportunities for promotion
    • The manager does not have to spend so much time managing staff
  • Flat Organisation
    • Few managers
    • Wide span of control

Importance of Effective Delegation

  • Delegation is giving authority for certain decisions to those below the manager.
  • Gives the manager more time to work on other aspects of the business.
  • Also plays an important part in increasing job satisfaction and motivation of employees.

Centralised and Decentralised Business

  • Decentralised Businesses: Organisations where important decisions are delegated to managers in other departments / locations.
  • Centralised Businesses: Organisations where important decisions are taken at the center and then passed out to the various departments / locations.

Centralised vs. Decentralised

  • Centralised Advantages:
    • Senior management has complete control over resources.
    • Senior managers are trained & experienced in decision-making.
    • Prevents parts of businesses acting independently.
    • Coordination and control are easier.
  • Centralised Disadvantages:
    • Employees may be de-motivated without any authority.
    • Brings less creativity and fewer ideas.
    • People at the top are out of touch with the needs of customers served by more local employees.
  • Decentralised Advantages:
    • Workers have autonomy & may be better motivated.
    • It speeds up decision making.
    • Takes pressure off senior managers.
    • Workers can be creative & share ideas.
    • Provides promotion opportunities at different managerial levels.
  • Decentralised Disadvantages:
    • Senior managers may lose control of resources.
    • Costs may be higher, due to less standardization & more variability in decision-making processes.
    • Procedures needed to make decision making easier.
    • Some employees may not have the ability to make decisions.
    • Some employees may not welcome the extra responsibility.

Organisational Charts and Growth

  • As businesses grow, the formal organisational chart will change.
  • Most businesses start small – have an entrepreneurial structure – decisions are made ‘centrally’ by the owner or key workers.
  • As businesses grow they take on a more traditional structure – based on hierarchy – decision making is shared throughout the business.

Matrix Structure

  • Some businesses favour a ‘matrix structure’.
  • Employees are put in teams that cut across departmental roles – they work together on a specific project.