Organisation structures. Formal organisation This is the internal structure of a business — the way in which human resources are organised. It takes into

Organisation structures


Formal organisation

This is the internal structure of a business — the way in which

human resources are organised. It takes into account:—the relationships between individuals—who is in charge—who has authority to make decisions—who carries out decisions—how information is communicate


Span of control

• The number of people who directly report to one manager in a hierarchy.• The more people under the control of one manager, the wider the span of

control.• Less people means a narrower span of control.• The example below would have a span of control of four people.

David Cameron

George Osborne Theresa May Michael Gove Nicky Morgan


Chain of command

Line in which orders and decisions are passed down from the top of

the hierarchy to the bottom e.g.

David Cameron

George Osborne

Junior Treasury minister

Civil servant


Flat structures (1)

These have a few layers and a wider span of control.

Advantages

Vertical communication is often quicker.

It costs less money to run a wider span of control because a

business does not need to employ as many managers on

higher salaries.

Workers are more motivated as they benefit from job

enrichment.


Flat structures (2)

Disadvantages

Not much opportunity for promotion. Workers will receive

the skills required for these managerial positions but will

get frustrated with the promotional opportunities available,

which can lead to a high labour turnover.

Difficult and time consuming for managers to control so

many workers.


Tall structures (1)

Lots of layers and often a narrow span of control.

Advantages

More opportunity for promotion, as more layers within the

business.

Quicker horizontal communication.

Closer supervision of workers and fewer mistakes.


Tall structures (2)

Disadvantages

Vertical communication can become difficult and lead to

poor motivation of subordinates.

Costly, as there are lots of managers.

Poor motivation, as little delegation occurs.


Delegation

To give somebody the authority to perform a particular task.

It is important to note that it is the authority to do the task

that is delegated and not the final responsibility, i.e. if the

job is done badly the manager will still need to accept

responsibility.

Student question

How does delegation link to leadership styles?


Business structures (1)

Centralisation Managers keep control. Simple to understand. Not much responsibility for staff but fewer mistakes. Costs can be cut by standardising purchasing etc. Strong leadership.


Business structures (2)

Decentralisation Empowering and motivating. Freeing up senior managers’ time. Better knowledge of those closer to customers. Good staff development.


Types of business structure

1. Entrepreneurial — decisions made centrally.2. Pyramid/hierarchical — staff have a role; shared

decision making; specialisation is possible.3. Matrix — staff with specific skills join project teams;

individuals have responsibility.4. Independent — seen in professions where organisation

provides support systems and little else.


Decisions can be made quickly in this structure

All decisions made centrally

Great reliance on key workers supporting decision makers

Few decisions made collectively

Decision maker

Key worker

Key worker

Key worker

Key worker

Entrepreneurial


Decisions pass down from managers to staff

Information flows up from staff to management

This is the traditional structure — there is specialisation of tasks e.g. finance, production, sales, marketing etc.

Decision making is shared throughout the business

Pyramid


Marketing Production Finance

Project A

Project B

Project teams created

Staff with specialist skills

Emphasises getting people with specialist skills together into project teams. Individuals within the team have their own responsibilities. Supports Theory Y type managers.

Workers are organised based on their expertise

Matrix


Matrix is the best way of organising people, as it is based on skills and expertise.

Matrix gives more delegation. Matrix fits in with theory Y managers Pyramid is argued to be more theory X. Matrix needs expensive support systems. It is costly to run separate

project teams. Might be difficult to coordinate teams from different departments.Evaluation: it often depends on the business e.g. matrix

structure complements a magazine business, might not be ideal in a clothes factory.

Matrix vs pyramid

Documents

Organisation structures. Formal organisation This is the internal structure of a business — the way in which human resources are organised. It takes into