Organizational Structure Unit 2.2

IB Specifications  The Formal Organization Delegation and Span of Control Levels of Hierarchy Flat vs Tall Chain of command  Be able to construct different types of organization charts and describe the nature of their structure Analyze changes in these structures and their effects

IB Specifications  Organization of Human Resources Identify why firms need to organize employees in certain ways  Function  Geography  Analyze methods of organizing human resources used by different organizations

Levels of Hierarchy  Hierarchy is the system of ranking people How they are linked  Directly vs indirectly  Vertically vs horizontally

ORGANIZATIONAL STRUCTURE  Delegation passing AUTHORITY (power) and RESPONSIBILITY to another  Resulting in accountability who’s to blame  Chain of command line of authority/who reports to whom  Levels of Hierarchy people on same reporting level in business  Span of Control How many people report to someone

Centralization : Decentralization CentralizedDecentralized Fixed set of rules and proceduresAllows more local decisions to be made which reflect different conditions Business has consistent policies, prevents conflict Develops more junior managers and prepares them for challenging roles Senior managers take decisions in the interest of the whole business Allows delegation and empowerment and these will have positive effects on motivation Central buying should allow for greater economies of scale Decision making in response to changes – local market conditions should be quicker and more flexible Senior managers at central office will be experienced decision makers HO involvement not constantly required

Flat ORGANIZATIONAL STRUCTURE  Has few levels of management  Decentralized  EFFECT OF FLAT ORGANIZATIONAL STRUCTURE Responsibility and authority are passed away from the top of the business to regional offices and departments.  The advantages of this method of management are: The development of many employees by empowering them. The business becoming faster and more efficient in its operations. Higher levels of morale and motivation amongst the employees.  However, the disadvantages include: A loss of control / power at the top of the business. Getting too many employees involved in decision-making may lead to mistakes being made.

Tall ORGANIZATIONAL STRUCTURE  EFFECT OF TALL ORGANIZATIONAL STRUCTURE many levels of hierarchy highly centralized decision-making  key decisions being made by senior management, with little responsibility and authority being passed down the hierarchy.  The advantages of this method of management are: The business has tight control over its operations. people can specialize in the jobs to which they are best suited.  However, the disadvantages include : The business becomes rather inflexible and bureaucratic in its operations. Decisions can take a long time to be made. There is very little use made of employees further down the hierarchy.

WAYS OF DIVIDING THE HIERARCHY  Geography  Role/ function HR, Marketing, Finance, Production,  Be able to analyze the pros and cons of each model for a business

Delegation Releases managers to undertake a more strategic role If the task is not made clear, training not provided, then delegation is unsuccessful Shows trust in subordinates and this motivates staff to do well If sufficient authority not granted, then delegation will be unsuccessful Develops and trains staff for more positions and is one way of assisting people to achieve Managers may delegate boring jobs that they do not want to do this will not prove to be motivating