LO3 - Understand the effect that different organisational structures have on how business operate
3.1 - Organisational structures
Flat structure
Hierarchical/tall structure
Centralised structure
Decentralised structure
Matrix structure
3.2 - Organisational charts
Elements of the organisational structure
Status of different levels of job role
In medium to large businesses, there are different job roles at different levels of authority;
Chief executive - the person with the most authority in a business, responsible of the success of failure of the business. They are answerable to stakeholders e.g. customers, government, local community.
Directors report to chief executive. In a medium sized business may be several directors each in charge of a function (sales, finance).
Managers make sure that their department achieves their aims and objectives identified by the directs. Managers report directly to the directors.
Supervisors in charge of team members in a specific area of a department, they make day to day decisions to make sure their area is run smoothly.
Assistant/operative are the bottom of the hierarchy, responsible for carrying out instructions given out by their supervisor
Include division of work, span of control and chain of command.
Organisational charts show these elements so everyone is clear about their job role, who is in charge of who and how communication flows.
Important to show these elements clearly so that a business runs smoothly and in a case of emergency everyone knows who to report to. Especially useful in a large organisation where there are a lot of employees.
Makes the most important decisions that affect the whole business - future plans, how business is presented to the world and the direction it is going.
Leaders that oversee all activities in their function. Plan departmental strategies and take part in the overall strategic decisions of a business.
Main role is to make sure that the areas under their leadership contribute to achieving the overall aims of a business.
Overall managers are in charge of the activities in their department. Decisions about the whole department are made by a manager.
E.g. a golf course supervisor would make sure that the grass is cut and trees managed.
Many layers of managment, resembling a pyramid - Chain of command clearly defined, top to bottom - A person in charge of several people at each level.
Few layers - chain of command is short - span of control is wide.
Advantages; Communication is good due to short chain of command - information passed is accurate - more interaction between top and bottom levels.
Authority is delegated = decision being made quicker cause info and orders more correct.
Wide span of control means employees are empowered & motivated to make decisions - Less management levels keep staff costs down = better efficiency.
Disadvantages: Wide span of control means employees level are not supervised closely leading to mistakes.
Fewer levels reduce opportunity for promotion, might cause ambitious employees to leave.
Best suited to smaller businesses with fewer jobs and division of functions unnecessary.
Clear division of functions e.g. finance or marketing - Directors and Managers with specialist skills and expert knowledge are appointed, then all functions run smoothly.
Advantages: Everybody knows their roles and to whom they are accountable - Authority is delegated from above so employees are empowered & decisions are made quickly
Narrow span of control makes supervisor closer, less mistakes - Opportunities for promotion, employees more motivated - middle management can specialise = more efficiency.
Disadvantages: Responses to problems can be slow, has to go through many levels - Communication can be poor cause of long chain of command, information can get distorted - Different departments may make decisions that don't benefit whole business.
Authority can be delegated, responsibility cannot, people higher up are responsible for decisions made lower down, even if they aren't involved = implications for the selection and training of employees before authority is delegated to them.
Most suited to medium to large businesses with a large number of employees, and the armed forces.
Decisions for the whole business are made by the top - Information and instructions flow from top to bottom.
Advantages: Strong leadership = quick responses to potential threats, unforeseen circumstances - People at top tend to be experienced, less mistakes - Decisions tend to benefit whole business - Responses to problems can be quicker are only top people are consulted.
Disadvantages: People lower down may feel demotivated as decisions are made with our consultation - May be a better understanding of customer and employee needs lower down which are not taken into consideration
Best suited to small businesses e.g. haulage company's owner makes all operations decisions, which are passed on to drivers, telling them where to pick up and deliver goods.
People at the bottom are given authority to make decisions day-to-day activities - Decentralised structure relies on delegation of authority - Encourages to take more responsibility but is crucial that there is co-ordination.
Advantages: Employees feel empowered and motivated as they have more responsibility and can make decisions for themselves - People at top have more time to focus on important decision that affect whole business.
Quicker response to customer feedback as people lower down have a better understanding of their needs - For a business with branches in different locations the decisions can be made to satisfy local demand = better competitiveness.
Disadvantages: Decisions might not reflect those valued by whole business = sending confusing messages to stake holders
Quality of decisions made relies on expertise and experience of people lower down = training is crucial - Conflict might arise as people who are authorised to make decisions make them based on their own needs.
Best suited to certain supermarkets chains allowing their store managers to make decisions based on local needs and wants, increasing sales and customer satisfaction.
Teams from different departments are created to run different projects, focus on different products and services or to serve customers in different locations - Team members generally report to their departmental manager as well as project manager.
Advantages: Flexible arrangement - teams can be removed as a project is completed without causing major disruption - Close collaboration between departments = greater efficiency and productivity.
Communication is good, employees work as teams across departments, all expertise allows better & quicker decisions - Motivation in teams are they can contribute - Cross-functional team can be formed for the needs & wants of customers in a specific location.
Disadvantages: Team members may not know their immediate manager is = miscommunication - Team members may be given conflicting instructions from their departmental and project managers --> lower productivity & efficiency.
Managers have different leadership styles, could demotivate employees - Having two managers is costly, reduces profitability - Sharing employees can lead to unhealthy competition between departments e.g. project managers look for the best.
Best suited to businesses with multiple products or operating in different countries - draws together expertise of functional departments to create different projects or products up to a high standard.
Manufacturing company forms different teams based on different products made - Products have expert knowledge; marketing, finance, human resources & operations management department = a better chance in the market.
As company introduces new product, new cross-functional team is formed without having to take new employees - if product is unsuccessful, team will be removed and reassigned to different product.