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LO3: Understand the effect of different organizational structures on how…
LO3: Understand the effect of different organizational structures on how businesses operate
different organizational structures
organisation by function
most common way businesses are organised
employees work with others in the same functional area
e.g. in car dealership - sales assistants work with other sales staff in the sales department
organisation by product/service
more common in organisations that make a range of different types of products or service
employees work with others who produce a similar product/service
e.g. clothing manufacturer, all the staff who are involved with men's clothing division, and all of the staff who are involved in women's clothing work together in the women's clothing division
organisation by geographical location
more common in tertiary sectors - where services need to be located close to the customer, and in international businesses with branches abroad
employees of all status levels will be employed at each branch
e.g. credit reference organisation will have staff at all status levels in the UK & USA - so that there are staff who can authorise decisions appropriate for their own country
organisational structures
either flat or tall hierarchical structure - number of status levels a business has determines whether it is a flat or tall structure - flat has few levels and hierarchical - hierarchical structures: organisation of job roles by rank
business will also have a centralised/decentralised organisational structure - whether a business has a centralised/decentralised structure depends on where the decisions are made - centralised is where decisions are made by those at head office or at the top of the hierarchy - decentralised structure is where decisions are made in branch or lower down the heirachy
a business may from time to time also make use of a matrix structure - creates teams of employees taken from different functional areas to carry out a specific project as and when required - brings together employees from different functional areas to work on a particular project
elements of organisational structures
division of work the tasks that a business needs to do are shared out across the workforce - in most businesses the division of work is based on functional structures
span of control - the number of employees an employee or manager is responsible for - a manager with a narrow span of control is directly responsible for few employees - a manager with a wide span of control is directly responsible for many employees
chain of command - formal hierarchy of a business that prescribes who is in charge of whom and whose permission must be obtained
how elements of orgnaisational structures impact on business operations
communication paths - the way commands (downwards) and reports (upwards) travel along chain of command
in a business with tall organisational structure are likely to be longer than in a business with a flat organisational structure because of the number of layers that the communication needs to travel through
responsibility, authority, accountability - a business with decentralised structure gives more of responsibility, authority, accountability to positions lower down in the hierarchy that would otherwise be the case in a centralised organisational structure
responsibility - the particular task, or set of tasks, that an employee in any given job role must ensure is completed - responsibility to ensure that it is completed to an appropriate standard cannot be delegated
authority - the power which accompanies job role, for example, right to give orders, or the right to use the firms resources - authority can be delegated to subordinates
accountability - requirement to be answerable for quality and quantity of work done/not done
delegation - passing down of the authority to do a task to an employee of lower rank
a business with wide spans of control is likely to make greater use of delegation than a business with narrow spans of control
empowerment - enabling workers to make their own decisions and work autonomously without having to refer decisions to their superior
decentralised organisational structure is more likely to encourage empowerment
Ads & Disads of Organisational Structures
flat
advantages
short chain of command
communication is fast and responsive
improved feedback to decision makers
disadvantages
wide spans of control
time consuming role for managers due to having lots of employees to manage
tall
advantages
narrow spans of control
tighter control due to managers having fewer employees to manage
disadvantages
long chain of command
poor communication and slow decision making
numbers of managers required makes the structure expensive
centralised
advantages
decisions made by expert decision makers trained in the role
decisions made tend to unify the business benefiting the organization as a whole
disadvantages
lower ranked workers may feel alienated and unimportant
decisions may be made by high status employees who have limited understanding of customers needs
decentralised
advantages
increased job satisfaction leading to a more motivated workforce
decisions made by those who deal with the customers so more responsive to local needs
disadvantages
employees who make the decisions may lack the skills of experienced decision makers
decisions may be made to benefit an individual or department rather than the business as a whole
matrix
advantages
flexible structure which can better meet the particular needs of a specific project
allows the business to better meet the needs of customers, increasing customer satisfaction
disadvantages
can cause conflict as employees need to report their line manager and their project leader
can be difficult to balance time between project and non-project work
use of organisation charts
an organisation chart can show...
organisational heirachy of the business - number of layers
division of work - how work is distributed, in this case by functional area
spans of control - number of subordinates an employee manages
downwards flow of the chain of command which relates to who a particular employee can give orders to
chain of command
a specific jobs roles command status - subordinates they control
a specific job roles reporting status - the superior they must obey
upwards flow of the chain of command which relates to who a particular employee must report to and obey
status levels - shown by the horizontal levels - the higher the level the higher a job roles status in the organisation. in this case the board of directors has the highest status in the organisation and the inspectors and production workers the lowest status
status of different job roles
managers: lead and develop a business's long term strategy
supervisors: oversee a department, ensuring the company policies are implemented
directors: decide what work needs to be done to meet departmental aims and objectives
assistant/operative: complete tasks as directed
chief executive: assign duties to employees, explaining how these are to be carried out