business 3

• Organizational structure


  • Sets out the route of internal communication
  • Who has authority in the organization and different level of responsibilities
  • The titles and roles of individuals
  • People who employees are accountable to and those which they are responsible for
• Flexible organizational structures


  • Structure evolves according to consumer needs frequently e.g. teams may be disbanded and reformed
  • Temporary consultants and specialists may be hired to tackle rising demand
• Factors affecting organizational structure

  • Business size
  • Business objectives
  • Intrapreneurship
  • Growth and development
• Chain of command


  The way authority is organized and how information is passed through the structure
• Span of control

  The number of people who report to a manager directly
• Levels of hierarchy

  The number of layers that exist between the chief executive and a shop-floor employee
• Centralization and decentralization

  Centralized structure - decisions taken by those on top

  Decentralized structure - more decision-making authority to employees lower in the organization
• Delegation and accountability

  Delegation - passing down of authority

  Accountability - responsibility remains with the manager or the person who has been delegated authority
• Responsibility


  When one is expected to complete tasks and is answerable for the results of their work
• Authority


  The right to make judgements or exercise control within the organization
• Hierarchical structure


  • Employees having clearly defined roles
  • All employees other than those on top are subordinates of someone
  • It establishes who employees report to
  • Decision making may become slower as business grows
  • Communication is usually downwards through established routes
• Types of hierarchical structure

  • Narrow/tall structure
  • Flat structure
• Narrow/tall structure


  Control is centralized and all major decisions are taken by senior managers
• Flat structure


  Decentralized decision making, employees have been delegated greater responsibilities
• Advantages of hierarchical structure


  • Promotion is clear to employees
  • Individual tasks well assigned to employees
  • Clear establishment of authority and responsibility
• Disadvantages of hierarchical structure


  • Difficult to coordinate activities due to distance between top and bottom
  • Poor communication due to more layers in the organisation
  • Managers may be out of touch especially senior and junior managers
  • Low flexibility and response to consumer needs
• Functional structure


  • The hierarchy is based around different business departments (finance, marketing, etc.)
  • Specialists operate within their field of expertise and implement unique and effective ideas for the improvement of their department
• Advantages of functional structure

  • Employees are well informed about their role in the business
  • Each manager works within their expert fields
  • Increased worker loyalty within departments
  • Each department will have a clear chain of command
• Disadvantages of functional structure

  • Departments may begin competing with one another
  • Employees will only be concerned about their own department and not the overall business needs
  • Lower coordination and communications between departments leading to duplication of efforts
• Product-based structure


  • A business with a diverse range of products create organizational structures for each of their product with specialist teams to support it
• Geographic structure


  • Structured around geographic location or divisions
• Matrix structure


  • Teams with vertical chains of command, in charge of horizontal projects of product teams

  Teams of individuals with specialist skills are put together to complete a project
• Advantages of matrix structure


  • Increased worker loyalty within departments
  • Workers use their skills effectively, regardless of their position in the organization
  • Employees respond quickly to changes in consumer needs
  • Increased motivation as employees will be given challenging tasks
  • A range of expertise is used for a project
• Disadvantages of matrix structure


  • Employees have divided loyalty between teams and departments
  • A lot of administrative staff may have to be hired to support projects
  • Employees have divided loyalty between teams and departments
  • Costly
• Delayering


  Removing some layers from the levels of hierarchy to make the structure flatter
• Benefits of delayering


  • Junior employees will receive more challenging tasks and greater authority
  • The chain of command will shorten and information will flow more efficiently within the organization
  • Wage costs may decline as middle managers are removed. This makes the business more competitive
• Drawbacks of delayering


  • Loss of essential knowledge as the next generation of managers are dismissed
  • Loss of jobs and job security within the organization
• The key point is that delegation passes down the organisational structure, while accountability flows upwards from subordinates to managers
• Hierarchy


  As a small business grows, the owner may hire two managers to decrease workload. As employees increase and the spans of control become too wide, more managers may be hired.
• Delegation


  The passing down of authority
• Accountability


  Responsibility remains with the manager or the person who has been delegated authority
• Delegation and accountability


  1. Delegation passes down the organisational structure

  2. Accountability flows upwards from subordinates to managers
• Delegation affects all aspects of a business and not just its workforce
• Implementing delegation may be costly initially but, over time, it can improve employee motivation and productivity, helping to reduce unit costs of production
• Delegation and motivation

  • Delegation fulfills employees' self-esteem needs by being an active part of decision-making and having more responsibility, authority and recognition
  • Delegation of complex and interesting tasks is a motivator as employees develop more interest in their work
• Authority and responsibility


  • Even if a manager delegates authority, the overall responsibility of the task's completion and quality will be upon the manager
  • For delegation of authority to be effective, the manager must have trust in employees to make decisions in the best interests of the business
• Advantages of decentralization


  • Fast and effective response to customers as junior managers/employees will be more in touch with their needs
  • The workload of senior managers will reduce as junior managers are delegated to
  • Provides employees the room to achieve and receive recognition leading to increased motivation
  • Junior managers range of skills will be challenged and expanded as they are given a greater decision-making role
• Disadvantages of decentralization


  • Not suitable for when employees are unequipped to make decisions or unwilling to take up this authority
  • If buying decisions are made centrally, the business is more likely to achieve purchasing economies of scale
  • Some businesses remain centralized to reflect the organization's culture of respect
• Line managers


  Hold departmental responsibilities over people and resources, fulfill a role in the line of command from top to bottom, and are in charge of subordinates fulfilling certain duties and tasks
• Staff managers


  Contribute to the achievement of objectives only indirectly, their main responsibility is to ensure that support is in place for line managers to be trained and equipped with the right skills when they carry out operations