Organisational Structure of a Business

Specification Detail

Organisational structure: the importance of divisional structure, levels of hierarchy, chains of command and centralised v decentralised systems

Why Do Businesses Need to be Organised?

As a business gets bigger it needs to be organised

The structure determines: Who is responsible for what job and Who is responsible to whom

Organisational structure

There are 3 main types of organisational structure:Tall or HierarchyFlatMatrix

Forms of Organisational Structure

Workers

Supervisors

Managers

Directors

Managing Director

Board Of Directors

Hierarchy/Tall structure

Workers

Managers

Owners

Forms of Organisational Structure

Flat structure

BODMD

R & D Transport

Production

SalesManaging

Finance

SupportServices

HRM

R E S P O N S I B I L I T Y & A U T H O R I T YR E S P O N S I B I L I T Y & A U T H O R I T Y R E

S P

O N

S I B

I L I T Y

& A

U T

H O

R I T

Y

R E S P O N S I B I L I T Y & A U T H O R I T YR E

S P

O N

S I B

I L

I T

Y &

A

U T

H O

R I T

Y

Forms of Organisational Structure

Matrix structure

Organisational chart

A _________ which shows the _________ structure of an ______________

Diagram Internal Organisation

ProductionDirector

H. ResourcesDirector

FinanceDirector

Marketing Director

Logistics Director

Staff Staff Staff Staff Staff Staff Staff Staff Staff Staff

Managing Director

ProductionManager

H. ResourcesManager

Finance Manager

Marketing Manager

LogisticsManager

Board of Directors

Forms of Organisational Structure

Tall/Hierarchy structure

Staff Staff Staff Staff Staff Staff Staff Staff Staff Staff

ProductionManager

H. ResourcesManager

Finance Manager

Marketing Manager

LogisticsManager

Owners

Forms of Organisational Structure

Flat structure

Chain of Command

Line on which orders and decisions are passed down From top of hierarchy to bottom

ManagingDirector

ProductionDirector

ProductionManager

FactorySupervisor

MachineOperators

• The longer the chain the more complex communication is. Messages get lost

• Operators/workers may not feel involved in decisions

• May be hard for company to change as more groups to resist changes

No defined line of authority

No defined chain of command

Encourages teamwork

Communication very fastMatrixStructure

Reduced line of authority

Needs all levels to function

Short chain of command

Communication fasterFlatStructure

Long chain of command

Communication is slow

Lines of communication clear

Large organisations, usually secure

D i s a d v a n t a g e sA d v a n t a g e s

Hierarchal Structure

Advantages & Disadvantages

Summary Questions

Key questions:

1. What are the 3 main types of organisational structure?

2. What is an organisational chart?

3. What is the chain of command?

4. Why do businesses have different types of structures?

Centralised and Decentralised systems

TASK: Put the following statements into a chart describing advantages and disadvantages of decentralisation and centralisation

Advantage Disadvantage

Advantage Disadvantage

Centralisation

decentralisation

Centralised Organisations

Advantages Tight control of

decisions Decisions

made by senior management

Decisions are consistent

Disadvantages Lack of

motivation for managers

Central management may be “out of touch”

Slow to make decisions

De-Centralised Organisations

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