Organisational StructureThis unit looks at the various ways that

businesses organize their human resources

Key Topics

• The formal organization: job roles

• The formal organization: organizational charts

• Delegation and span of control

• Delayering

• Levels of hierarchy

• Chain of command

Why is there a need for a more formal and organized structure?

• Accountability – shows who is held responsible for what job.

• Responsibility – shows who is in charge of whom.

Formal and Informal Structures

FormalLine management

Manager

Supervisor

Chain of command

Span of control

Departments

Teams

InformalAge

Experience

Qualifications

Peer groups

Friendship groups

‘Floors’

Levels of Hierarchy

These are the different job titles/roles given to each layer of an organisation and include terms such as:

• Owners

• Directors

• Managers

• Supervisors

• Workers etc

CEO

Board of Directors

Management

Supervisors and Team Leaders

Other Employees

Making an organisational chart

Task 1: Complete the “roles in the hierarchy” activity, independently then discuss your answers with your neighbour

Task 2: Form 2 groups and create an organisational chart for the secondary school using the materials supplied to your group. You have to work fast and beat the other group to it.

The buzzer will go in 10 minutes!

Task 3: Identify the levels of hierarchy, span of control of all line managers and possible chains of command. Discuss the advantages of such a chart and share with the class.

Organisational Charts

An organisational chart shows 4 features of a business:

1. Functional departments within a business e.g. Marketing, Finance, HR, Production

2. Chain of Command - which people have authority over others

3. Span of Control – number of staff directly accountable to a single line manager

4. Channels of Communication – route that messages are communicated within an organisation

Advantages of charts

– Shows how everyone is linked– Show communication channels – Informs employees as to who is accountable to

whom– See your own position in the organisation– Shows links between departments– Gives a sense of belonging

Flat Organisational Structure

1 s t em p loyeeP art t im e ass is tan t

2 n d em p loyeeP art t im e ass is tan t

3 rd em p loyeeS atu rd ay s ta ff

S o le Trad erO w n er/B oss

In this structure there are few layers and tend to describe small businesses such as sole traders/partnerships

Flat Organizational Structure --Vertical Structure.

Characteristic of decentralized companies with relatively few layers of management and relatively wide spans of control

Typical Law Firm

Chief Partner

Partners

Associates

Relatively wide span of control5 - 5 - 1010

Tall or Hierarchical Organisational Structure

S u p erviso rS ec tion x

W orkerS ec tion y

S u p erviso rS ec tion y

M an ag erA rea a

M an ag erA rea b

S en io r M an ag erD ep t 1

S en io r M an ag erD ep t 2

S en io r M an ag erD ep t 3

S en io r M an ag erD ep t 4

B oard o f D irec to rsO p era tion a l L ead ers

S h areh o ld ersP art ow n ersA tall or

hierarchical structure is one which has many levels/layers.

It tends to describe larger businesses such as Ltds and PLCs

Tall Organizational

Structure -Vertical

Characteristic of centralized companies with multiple layers of management and relatively narrow spans of control

United States ArmyUnited States Army

GeneralGeneral

ColonelsColonels

MajorsMajors

Captains & Captains & LieutenantsLieutenants

Warrant OfficersWarrant Officers

SergeantsSergeants

CorporalsCorporals

PrivatesPrivates5 - 5 - 1212

Relatively narrow span of control.

At lower levels, where tasks are similar and simpler, span of control widens.

• Now create another chart using the US army ranks issued to you.

• Compare it with the BISS chart you created earlier with relation to the key terms learnt in this topic.

Different method of Departmentalization

DepartmentalizationProcess of grouping jobs into logical units

Customer Departmentalization Departmentalization according to types of customers likely to buy a given product

Product Departmentalization Departmentalization according to specific products being created

Process Departmentalization Departmentalization according to production processes used to create a good or service

Departmentalization

Geographic Departmentalization Departmentalization according to areas served by a business

Functional Departmentalization Departmentalization according to groups’ functions or activities

Multiple Forms of Departmentalization

6 - 6 - 1616

President

Vice PresidentMarketing

Vice PresidentProduction

Vice PresidentFinance

Texas PlantManager

Oregon PlantManager

Florida PlantManager

ConsumerProducts

IndustrialProducts

ConsumerProducts

IndustrialProducts

ConsumerProducts

IndustrialProducts

Functional DepartmentalizationFunctional Departmentalization

Geographical DepartmentalizationGeographical Departmentalization

Product DepartmentalizationProduct Departmentalization

Delegation• Delegation is when authority (and sometimes

responsibility) for a task/activity is handed down from superior to subordinate

• You need to understand how delegation can cloud the issue of ‘accountability’

Task

Describe a situation where delegation is essential

Describe a different situation where delegation would be disastrous

Fear of Delegating

Many managers actually have trouble delegating tasks to others.

This is especially true in small businesses where the owner-manager started out doing everything.

Why do some small business managers have trouble delegating effectively?

• They feel that employees can never do anything as well as they can.

• They fear that something will go wrong if someone else takes over a job.

• They lack time for long-range planning because they are bogged down in day-to-day operations.

• They sense they will be in the dark about industry trends and competitive products because of the time they devote to day-to-day operations.

What can small business managers do to delegate effectively?

Admit that they can never go back to running the entire show and that they can in fact prosper—with the help of their employees.

They must learn to let go.

Four reasons some managers in big companies don’t delegate as much or as

well as they should:• They fear that subordinates don’t really know how to

do the job

• They fear that a subordinate might “show the manager up” in front of others by doing a superb job

• They desire to keep as much control as possible over how things are done

• They simply lack the ability to effectively delegate to others

How can managers in big companies learn to delegate more effectively?

All managers should recognize that they can’t do everything themselves.

If subordinates can’t do a job, they should be trained so that they can assume more responsibility in the future.

Managers should recognize that if a subordinate performs well it also reflects favorably on the manager.

A manager who simply doesn’t know how to delegate should seek specialized training in how to divide up and assign tasks to others.

Matrix Structure

A matrix structure refers to the flexible organisation of employees from different departments temporarily working together on a particular project.

Board of Directors

Security

Production

HR

Finance

Marketing

Team Project

Centralized Structure• Vast majority of decision-making is performed by a

very small number of people

Pro

-Rapid decision making

-Better control

-Better sense of direction

Cons

-Increase pressure/stress for decision makers

-Inflexibility

-Demotivation

-Bottleneck if many decisions to be made

Department

Department Department

Department

Department

DecisionMaker(s)

Decentralised Structures• Some decision making authority and responsibility

is passed onto others in the organisation.

Pro

-Input from workforce

-Speedier day-to-day decision making

-Higher morale

-Improved accountability

-Encourage teamwork

Cons

-Loss of control

-Greater chance of mistakes

-Greater reliance on effective communication

-Duplication of functions

Flexible Structures Henry Mintzberg p221

Mintzberg came up with 6 organisational configurations:

1.Innovative

2.Entrepreneurial

3.Machine

4.Divisionalised

5.Professional

6.Missionary

All can be evident in an organisation, but one is likely to dominate.

Operating core

Techno structure

Support staff

Middle line

Strategic Apex

Ideology

Flexible Structures Henry Mintzberg (cont)

Minztberg also argued that:

- Different organisational configurations to suit different businesses.

- For any structure to work effectively, employees must believe in the organisation's common values (ideology).

- A business can only remain successful if its organisational structure is flexible.

Flexible Structures Tom Peters

Argued that:• Flatter organisational structure are more successful

since:– Better channels of communication– Greater opportunities for delegation and empowerment– Greater flexibility in adapting to change

• Key features of successful companies (researched 43 highly successful companies)– Motivated workforce– Removal of bureaucracy leading to greater flexibility– Use of project teams (matrix structures) leading to more

innovative and creative ideas being generated

Changes in Structures

Organisations can change their internal structure by:

• Moving from a flat to a tall structure

• Moving from a tall to a flat structure

• Moving to a matrix structure

Organisations can change their external structure by:

• Changing business structure

Outsourcing, Offshoring and Migration

Outsourcing – this is when a business recruits another business or group of employees to carry out work for them (example)

Offshoring – this is when parts of a business or a group of employees are based overseas (example)

Migration of HR – this is similar to offshoring but is when the whole of the HR department are based overseas (example)

Matching Activity

Delayering

Chain of command

Centralisation

Organisational Chart

Bureaucracy

Span of control

Decentralisation

• the number of subordinates working under a supervisor

• the way authority and powers are passed down in a business

• the execution of tasks that are governed by official administrative and formal rules of an organisation aka “red tape”

• this exists when a small number of managers/leaders have all of the authority

• this exists when many workers have a degree of authority

• refers to the diagrammatic representation of a firm’s formal organisational structure

• is the process of removing one or more levels in the hierarchy in order to flatten out the organizational structure.