Organisational Structures

 Every organisation made up of more than one person will need some form of organisational structure. An organisational chart shows the way in which the chain of command works within the organisation.  The shape/structure of the organisation is best revealed by examining the organisational chart. The chart shows the main parts of the business and the relationship between the various parts.

 When you look at an organisation chart you should get a clear picture of what the relevant parts of the business are and who reports to whom. When we talk about the management line we mean the person who is directly responsible for someone else.

Purpose of organisational strucures  A business must chose the correct organisational structure so that its stakeholders can see clearly the:  Communication channels and lines of control  How the workload is broken up between staff and departments  An organisation divides up its work this way so that :  Staff are clear what their roles and duties are  There is no time-wasting overlap in decision making  Staff at all levels can see who they should be reporting to

Types of organisational structures  As businesses grow, it is important that they build the organisation using the most appropriate structure. Choosing the correct type of structure could mean the difference between success and failure

Types of structures  All businesses have to organise what they do. A clear structure makes it easier to see which part of the business does what.  There are many ways to structure a business.  Function  Product or activity  Geographical  Types of Customer  Process  Matrix

Function  The business is made up of parts that are designed to meet specific purposes, eg, marketing, accounting  Arranging the business according to what each section or department does

Product or activity  The business is made up of departments based on the products each sells, eg Nike has departments for boots, clothing etc  Organising according to the different products made

Geographical  The business is made up of parts that deal with regional areas, eg SE branch, European etc  Geographical or regional structure

Customer  The business is made up of areas that deal with different customers. Eg clothing shops that have different depts for men, women, children  Where different customers have different needs

Process  The business is made up of different areas that rely on processes or machinery that is common in manufacturing, eg printing in one dept, magazine production in another  Where products have to go through stages as they are made

Matrix  The business is structured on people working as part of a team. A person working on a project may be responsible to more than one team leader – the team leader of the department they work and the project team leader.

Flat or tall structures  Organisational structures can differ depending on the organisation’s ethos or industry. In the past, most organisations had many layers in their organisations and these are called TALL STRUCTURES. Companies such as Dyson, Google and Vodafone have reduced the number of layers making them FLAT STRUCTURES. This speeds up communication as there are fewer levels for the decision making to pass through. This also helps boost morale and motivation as staff feel they can talk directly to senior managers. The more layers and organisation has the harder it can be to adapt and make quick decisions!

Activity  Brainstorm 4 advantages and 4 disadvantages of a flat structure

Advantages of flat structure  Fewer managers are needed, which saves money  Managers have to give more responsibility to the workers, which leads to more job satisfaction to the employees  Communication between staff and management is faster and more efficient because there are fewer layers  Fewer management layers usually leads to faster decision making

Disadvantages of a flat structure  Each manager is responsible for more people  Managers have to rely on their subordinate staff much more to work efficiently and safely  Managers may lose control of subordinates if there is too wide a span of control of each manager  It can lead to overwork and stress  There are fewer opportunities for promotion

Formal and informal structures  Organisations generally have a formal structure which is the way that the organisation is organised by those with responsibility for managing the organisation. They create the formal structures that enable the organisation to meet its stated objectives.  Often these formal structures will be set out on paper in the form of organisational charts. However, in the course of time an informal structure develops in most organisations which are based on the reality of day-to-day interactions between the members of the organisation. This informal structure may be different from that which is set out on paper.

Informal structures develop because  People find new ways of doing things which they find easier and save them time  Patterns of interaction are shaped by friendship groups and other relationships  People forget what the formal structure is  It is easier to work with informal structures

 Sometimes the informal structure may conflict with the formal one. Where this is the case the organisation may become less efficient at meeting its stated objectives. However, in some cases the formal structure may prove to be more efficient at meeting organisational objectives because the formal structure was badly set out.  Managers need to learn to work with both formal and informal structures. A flexible manager will realise that elements of the informal structure can be formalised, ie by adapting the formal structure to incorporate improvements which result from the day-to-day working of the informal structure.

Functional areas of a business  Finance and accounts  Human resources  Production operations  Customer service  Marketing/sales  Administration/IT  Research and development