organisational structure of a business. tutor2u ™ gcse business studies why do businesses need to...

Organisational Structure of a Business

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GCSE Business GCSE Business StudiesStudies

Why Do Businesses Need to be Organised?

Small businesses (particularly sole traders) have an informal organisational structure

As a business gets bigger then it starts to form some kind of organisation

An organisation structure is required as soon as there are several people working in the business

The structure determines:

Who is responsible for what job and

Who is responsible to whom.



Hierarchy

Describes management structure of business

From top of company – managing director, through to shop floor worker

Usually best understood by drawing an organisation chart

Shows which levels of management and employees report to whom



Example of a Hierarchy



Span of Control

What is the 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

Example below shows a span of control of 4 for the Marketing Manager

Marketing Manager

Marketing Assistant

Market Researcher

Telesales Supervisor

Customer Care

Assistant



Advantage 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 more effective

Requires a higher level of management skill



Advantage of a Wide Span of Control

There are less 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 bottom of hierarchy

Can provide good opportunities for promotion

Manager does not have to spend so much time managing staff

Flat organisation

Few managers

Wide span of control



Centralised Organisations

What are they?

Organisations where important decisions are taken at the centre and then passed out to the various departments / locations

Advantages

Tight control of decisions

Decisions made by senior management

Helps decisions to be consistent across the business

Avoids repetition of functions (e.g. only one purchasing department)

Disadvantages

Lack of motivation for managers

Central management may be “out of touch”

May be slow to make decisions that need to taken quickly



De-Centralised Organisations

What are they?

Organisations where important decisions are delegated to managers in other departments / locations

Advantages

Increased motivation of managers

Encourages local initiatives

Decisions based on more up-to-date information

Decisions made quicker

Disadvantages

Managers may lack experience

Local decisions may be inconsistent with the overall business aims and objectives

Duplication of functions and costs



Chain of Command

Line on which orders and decisions are passed down

From top of hierarchy to bottom

ExampleManagingDirector

ProductionDirector

ProductionManager

FactorySupervisor

MachineOperators



Importance of Effective Delegation

Delegation is giving authority for certain decisions to those below manager

Gives manager more time to work on other aspects of business

Also plays an important part in increasing job satisfaction and motivation of employees



Main Departments in a Manufacturing Business

Production Makes sure that production plans are met on time and products of right quality are produced

Accounts Provides a detailed record of money coming in and going out of business

Prepares accounts as a basis for financial decisions

Sales and Marketing

Sales - deals with all aspects of selling to customers

Marketing - carries out market research, organises advertising and product promotion

Purchasing Buys all raw materials and goods required for production

Human Resources

Deals with all recruitment, training, health and safety

Handles pay negotiations with unions/workers

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