INTERNAL ORGANISATION How organisations sort themselves..and why.

Options. Business can organise by:- Function Structures Place Customer Technology Product/Service

FUNCTIONAL GROUPING Very common in most organisations Where the business is sorted into departments based on skills:- Marketing Finance Human Resources Operations Research and Development ……

Details Usually a centralised decision-making structure Decisions made at the top Traditional

PRODUCT OR SERVICE Organised into divisions Each division will have its own functions – self contained Used by large organisations Many merged conglomerates use this structure Cadbury Schweppes – 2 divisions

CUSTOMER GROUPING Organisations that are structured around customers or groups of clients Usually found in the service sector Medical practice Solicitors Bank

PLACE/TERRITORY Designed around geographical factors Used by companies selling over a large area Multinationals eg Shell Meet the needs of the customers in the different countries Locals can be employed

Allows specialisation TECHNOLOGY Used when production can be broken down into obvious stages Many manufacturing firms use this: Cutting Assembly Packing Transportation Allows specialisation

But …. Many firms may use a combination of these methods A business with a main functional structure may have a secondary technological structure in Operations and a customer grouping in marketing

FORMS OF ORGANISATION STRUCTURE

In brief Hierarchical Flat Matrix Entrepreneurial Centralised Decentralised

Hierarchical Structure Traditional Organised in levels Called the pyramid structure Decisions made at the top and passed down Shown in the form of an organisation chart Clearly defined roles Usually organised in functions Criticised for lack of flexibility Going through major restructuring

HIERARCHICAL STRUCTURE Rector Depute Rector PTs Senior Teachers Teachers Information Instructions

Details… Fayol said that an organisation with more than 5 levels will suffer from communication problems Chinese Whispers Effect Them –v- Us scenario Cannot react to changes in the business environment (market) Can be stagnant and overstaffed Is inefficient

Features of a Hierarchical Structure A Hierarchical structure will be made up of A NARROW SPAN OF CONTROL A LONG CHAIN OF COMMAND

Span of control If the organisation is to work effectively there must be a suitable span of control THE NUMBER OF PEOPLE IN THE BUSINESS THAT A MANAGER HAS DIRECT CONTROL OF

SPAN OF CONTROL WILL DEPEND ON:- How good the manager is at their job The type of work the business does The kinds of decisions that have to be made manager This manager has a span of control of 5

CHAIN OF COMMAND The Chain of Command runs right the way down an organisation from the top – the chairman through the managers to the workers at the bottom It is another way of describing the levels of an organisation

This organisation chart has 8 levels

CHAIN OF COMMAND An organisation should not have too many links in the Chain of Command as this leads to poor communications CHINESE WHISPERS EFFECT Short – 3 to 4 Long – 6 to 7

Problems with Hierarchical structures Designed for close control – no room for initiative Decision-making can take a long time Inability to change quickly

RESTRUCTURING/DELAYERING What can be done? RESTRUCTURING/DELAYERING The removal of layers from the organisation can reduce these problems Middle management have often been found to be carriers of information Not effective in the running of the business

Remove middle management Delayering The length of the Chain of Command is 8. This may be too long and the business could encounter communication problems. Delayering could help. Remove middle management

EMPOWERMENT Delayering leads to:- Workers being more responsible Workers being more productive Empowerment Motivation improves if staff are given more responsibility

DOWNSIZING This is also a method of reducing the size of your business and cutting costs If a particular area of your business is not profit making or can be contracted out then it can be removed THIS IS KNOWN AS DOWNSIZING:-

DOWNSIZING This example has 6 departments and could downsize if it had to cut costs. Remove department

THE FLAT STRUCTURE

A product of Delayering Caused by the need to respond to the market This structure has fewer levels of management: Shown as a flat pyramid No problems with communication Decisions are made more quickly Many large organisations have gone through the delayering process

The Matrix Structure Based around specialist skills and getting groups of people working together Individuals within a team have their own responsibility Gives scope for people lower down the organisation to use their skills Encourages initiative

Matrix Structure Team A Team B Team C Project X Project Y

The Entrepreneurial Structure Decision- maker

Features:- All decisions are made centrally Few collective decisions and a great reliance on key workers Most small businesses have this type of structure Decisions can be made quickly Subordinates know who is in charge Little consultation required Not effective for large businesses

Centralised Structure Where all decisions are made centrally (like entrepreneurial) Rely heavily on a number of key workers Advantages Senior management have full control Procedures can be standardised Senior managers have holistic view Senior managers are experienced

Decentralised Structure Subordinates have authority to take some decisions Delegation is freely used Advantages Empowerment of workers Reduces stress on senior management Provides greater job satisfaction for subordinates Allows flexibility and quick response to change

In practice…. It is unlikely that any organisation will use one of these structures completely There is usually a mix of both Quality and staff selection could be decentralised Finance is centralised