1. AS2: Business Studies (Organisational Design) Organisational Design

2. The way that a business is structured will be determined by:
The relationships between individuals
Who is in charge
Who has authority to make decisions
Who carries out decisions
How information is communicated

3. Organisation Charts Highlight communication problems
Allow individuals to see where they fit into the overall structure of the organisation and who they are responsible to and for
Allow firms to identify where specialist members of staff are required
Show how different departments relate to each other

4. Organisational Functions
Production
Finance
Human Resources
Sales and Marketing
Administration
Research and Development

5. AS2: Business Studies (Organisational Design)
Functional Organisation
Business
Finance
Production
Research &
Development
Human
Resources
Administration
Sales &
Marketing

6. Tall hierarchical structure Flat hierarchical structureX XX
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Tall hierarchical structure
Flat hierarchical structure

7. Ways to Structure a Business
By function: arranging the business according to what each section or department does
By product or activity: organising according to the different products made
By area: geographical or regional structure
By customer: where different customer groups have different needs 
By process: where products have to go through stages as they are made

8. Functional Structure Advantages
Specialisation – each department focuses on its own work
Accountability – someone is responsible for the section
Clarity – know your and others’ roles

9. Functional Structure Disadvantages
Closed communication could lead to lack of focus
Departments can become resistant to change
Coordination may take too long
Gap between top and bottom

10. Organisation by Product/Activity
Advantages
Clear focus on market segment helps meet customers’ needs
Positive competition between divisions
Better control as each division can act as separate profit centre

11. Organisation by Product/Activity
Disadvantages
Duplication of functions (e.g. different sales force for each division)
Negative effects of competition
Lack of central control over each separate division

12. Organisation by Area Advantages Serve local needs better
Positive competition
More effective communication between firm and local customers

13. Organisation by Area Disadvantages
Conflict between local and central management
Duplication of resources and functions

14. Other Organisational Structures
By Customer:
Similar to structuring by product
By Process:
Similar to structuring by function

15. Characteristics of Organisational Design
De-layering
Chain of command
Span of control
Decentralisation
Centralisation

16. Chain of Command
Route by which orders and decisions are passed through the organisation
information

17. Span of Control
The number of people (subordinates) over whom a manager or supervisor has direct control. It should never exceed 5.
Wide: More delegation, Reduces supervision, Better job enrichment
Narrow: Tighter supervision, Less chance of mistakes, Suitable where tasks are straightforward, easily checked and non changing, more levels of hierarchy therefore better promotion prospects

18. Decentralisation
Widespread delegation and the passing of power down to the lower levels for decision making
Better motivation of junior staff
Produces greater innovation
Reduces communication
More enthusiasm
Less consistency
Loss of control by senior staff
Lack of direction

19. Centralisation Only the top levels of the business have the
authority to take decisions
Tight financial control
Coherent strategies in marketing
Simplify and speed up decision making
Sharing of resources
De-motivation of lower levels
Poorer communication
Less input from lower levels

20. De-layering Removal of one or more layers from the organisation
Assist communication
Cuts out bureaucracy
Better staff motivation
Widens the span of control
Can lead to overwork
Less overhead costs
Reduces supervision