Unit 2.2 O RGANIZATIONAL S TRUCTURE

H UMAN R ESOURCES  People employed by the business  Manual  Skilled  Administrative  Management

F ORMAL O RGANIZATION  Internal structure – how human resources are organized  Relationships  Authority  Responsibility  Communication  Not to be confused with business organization or legal structure (sole proprietorship, corporation)

O RGANIZATION C HARTS

 Enables communication  Outlines employee position in relation to others  Identifies need for specialists  Shows relationships within a firm

O RGANIZATION B Y …  Function  Product  Process  Geography

C OMMAND AND C ONTROL  Hierarchy  Identifies ‘chain of command’  Ranks authority levels from top down  Flat vs. Tall  Span of Control  Number of subordinates under each manager  Narrow vs. Wide

C OMMAND AND C ONTROL

D ELAYERING  Removing one or more levels in a hierarchy, creates flatter structure  Reduces management, widens span of control

D ELAYERING Advantages  Reduce costs  Improve communications  Opportunities to empower employees to increase responsibility/authority Disadvantages  Fear of job loss  Overload employees  Costs of skill improvement  Delays in communications as a result of larger teams

A UTHORITY & RESPONSIBILITY  Responsibility: Accountability  Authority: Ability  Line  Staff  Functional  Delegation: Empowerment

A UTHORITY & RESPONSIBILITY Centralization  Senior management maintains control  Standardized procedures  Less decision makers to muddle communication  Decisions made from expertise of senior managers and for business as a whole Decentralization  Empowerment/Motivation  Reduces stress on senior management  Subordinates may better understand their area  Quick, flexible response to change  Management groomed for higher positions

B USINESS S TRUCTURE  Entrepreneurial  Bureaucratic, pyramid, or hierarchical  Matrix  Independence

E NTREPRENEURIAL  One central decision maker  Few collective decisions made by key individuals  Favorable in business which require quick decisions to be made  Common in small businesses  Becomes inefficient as organization grows larger

E NTREPRENEURIAL

B UREAUCRATIC, PYRAMID, OR HIERARCHICAL  Most well known  Common in medium to large businesses  Shared decision making  Employee roles and procedures are set  Emphasizes specialization  Reacts slowly to change

B UREAUCRATIC, PYRAMID, OR HIERARCHICAL

M ATRIX  Focuses on project teams  Specialists from each area necessary placed within a team, each has own responsibility  Focuses on expertise and skills of individual employees  Improves flexibility and employee motivation  Can be expensive to maintain and slow down decision making

M ATRIX

I NDEPENDENCE  Individuals are independent of one another  Organization is more of a support system  Lacks control and coordination  More common in doctors offices, etc.

I NDEPENDENCE

I NFORMAL S TRUCTURE  Informal relationships that naturally develop  Advice  Trust  Communication  Do not necessarily flow along same lines as an established formal structure within the firm!

F ACTORS I NFLUENCING B USINESS S TRUCTURE  Size  Owner’s leadership style  Business objectives  External factors  Informal structure  Corporate culture