No 106 SDS Jayasinghe Mawatha

Kohuwela, Nugegoda
337/1 Negombo Road, Wattala Ordinary Levels
Internal Organisation of Business

Formal organisation.

When any group of people joins together to work towards a common goal, there needs to be
organisation. A rowing team working towards competing at the Olympics needs trainers and
coaches, team doctors, a manager and other support workers.

Running a business involves planning, decision making, co-ordination and communication.

These tasks are easier if workers are organised into structure made up of different function or
departments. The internal structure of the organisation is known as its formal organisation.
Large organisations need to have a formal organisation structure, without it the business
would be difficult to control. Communications may break down, mistakes might occur and
staff may even become confused about their roles.

The formal organisation can be represented by an organisational chart which shows.

1. How the business is split into functions or departments.

2. The roles of employees and their job titles.
3. Who has responsibility.
4. To whom people are accountable.
5. Communication channels.
6. The relationship between different positions in the business.

An organisation chart for Denham plc, a manufacturer is shown below. The chair person at
the top of the hierarchy is accountable to the shareholders. Hierarchy means the order or
levels of responsibility in an organisation from the lowest to the highest.

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Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)
No 106 SDS Jayasinghe Mawatha
Kohuwela, Nugegoda
337/1 Negombo Road, Wattala Ordinary Levels
Advantages of an organisation chart

• The chart shows how everybody is linked together in the organisation. All employees
are aware of which communication channel is used to reach them with messages and
instructions.
• Every individual can see their own position in the organisation. They can identify who
they are accountable to and who they have authority over. Employees can see who
they should take orders from.
• It shows the links and relationship between different department within the
organisation.

Employees roles and responsibilities

Directors – they are appointed by the owners to run the business. Together with the
Chairperson they form the board of directors. They make all the important decisions in the
business. The above chart shows that the business is split into four departments and each
department will have a director. These four directors are accountable to the chairperson. They
also have authority over the managers. Authority means the right to command and make
decisions.

Managers – managers have a numbers of functions. They are responsible for planning,
controlling, organising, motivating, problem solving and decision making. They are
employed to get things done using organisations resources. The manager in each department
is accountable to the departmental director.

Supervisor – they monitor th work in their particular area and have authority over operators
and general workers.

Operatives – they are skilled workers who are involved in the production process. For eg:
they may operate machines, assemble products, work with tools or carry out maintenance.

General Staff – these are staffs that do not have any specific skill, however with training
they can perform a variety of tasks and gain promotions to other positions.

Professional staff - they are skilled and highly trained. Examples include lawyers,
accountants, doctors, pilots and dentists.

2
Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)
No 106 SDS Jayasinghe Mawatha
Kohuwela, Nugegoda
337/1 Negombo Road, Wattala Ordinary Levels
Features of Organizational structure

Chain of command – this is the route through which orders are passed down in the
hierarchy. Orders will be passed down through the layers from the top to the bottom.

If the chain of command is too long –

Span of control.

The number of subordinates reporting directly to a manager (This is your definition)

The span of control of said to be wide if a superior is in charge of many employees and
narrow if the superior is in charge of a few employees.

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Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)
No 106 SDS Jayasinghe Mawatha
Kohuwela, Nugegoda
337/1 Negombo Road, Wattala Ordinary Levels
Tall vs. Flat structure.

In its simplest form a tall organization has many levels of management and supervision.
There is a “long chain of command” running from the top of the organization eg: Chief
executive down to the bottom of the organization eg: shop floor worker. The diagram below
neatly captures the concept of a tall structure.

However, tall structures rarely exceed 8 levels of management. This is firstly because the no
of layers (i.e. management levels) decreases the span of control. Secondly the disadvantages
of the tall structure begin to outweigh the advantages of a tall structure.

In contrast to a tall organization a flat organization will have relatively few layers or just one
layer of management. This means that the “chain of command” from top to bottom is short
and the “span of control” is wide. Due to the small no of management layers. Flat
organizations are often small.

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Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)
No 106 SDS Jayasinghe Mawatha
Kohuwela, Nugegoda
337/1 Negombo Road, Wattala Ordinary Levels
Delegation –

Delegation is the process where a superior or manager will pass down a part of his authority
and work to his immediate subordinate.

Advantages of delegation to the manager

• Managers cannot do every job themselves.

• Managers are less likely to make mistakes if some of the tasks are being performed by
their subordinate.
• Managers can measure the success of their staff more easily.

Advantages of delegation to the subordinate –

• The work becomes more interesting and rewarding.

• The employee feels more important.
• Delegation helps to train workers and they can make progress in the organisation. It
gives them career opportunities.

Why might a manager not delegate

• Some managers are reluctant to delegate because they are afraid employee may make
mistake and he will be blamed or
• That the employee may do a better job than him and this may make him feel insecure.

Relationship and interdependence between departments.

It is very important for departments to work together. They are interdependent, which means
that they rely on each other for their success. There must be good communication between
departments to ensure that the business runs effectively. Some examples of relationship and
interdependence between different department are:

➢ The production department may have to meet with the marketing department to
discuss modifications to a customer’s order.
➢ The HR department will need to communicate regularly with the finance department
to discuss wages and salaries.
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Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)
No 106 SDS Jayasinghe Mawatha
Kohuwela, Nugegoda
337/1 Negombo Road, Wattala Ordinary Levels
➢ The finance department may have to communicate with the production
department to ensure that designs for a new product are profitable.

The roles of management

A manager can function as a leader and he is the head of the department and responsible for
the operations of his department. A manager’s role is to get things done by others.

✓ Planning: A manager must set objectives (targets) for his department. In order to
achieve these targets a manager must prepare a plan. A proper plan will help to
achieve the target easily without a plan things will not be done properly. The manager
is responsible for planning but he will get the inputs from his staff.
✓ Organizing: recruit the staff, giving them instructions, delegating work, providing
resources to the staff and making sure that the work is done.
✓ Co- ordination: in a business there are many departments. Each department has a
different objective. Eg: sales departments objective is to maximise sales. Production
depts objective is to increase production efficiency. The general manager must bring
all these departments together and make them work as a unit.
✓ Controlling: a manager must measure the performance of his staff and take corrective
actions if they are under performing. The manager must review the work of his staff
and give them feedback so that they can take correct their weaknesses.

6
Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)
No 106 SDS Jayasinghe Mawatha
Kohuwela, Nugegoda
337/1 Negombo Road, Wattala Ordinary Levels
Leadership

Styles of leadership

1. Autocratic leadership – is where the manager expects to be in charge of the business

and to have their orders followed.
2. Democratic leadership – get other employees involved in the decision making
process.
3. Laissez-faire leadership – makes the broad objectives of the business known to
employees, but then they are left to make their own decisions and organise their own
work.

Trade unions

Definition – a trade union is a group of workers who have joined together to ensure their
interests are protected.

Why do workers join a trade union?

When a person starts to work they may be asked by someone who represents a trade union if
they want to join. If the worker decides to join the trade union, they will pay an annual
subscription (a yearly fee). The benefits for worker is:

• Ability to engage in collective bargaining – trade union representative negotiates on

behalf of all its members. This puts workers in a stronger bargaining position than if
they negotiated individually to gain higher pay deals and better working conditions.
• One worker going on strike is not likely to be very effective.
• Provide legal support to employees who claim unfair dismissal or poor working
conditions.
• Unions pressurise employers to ensure that all legal requirement are met, Eg: health
and safety rules regarding the use of machinery,

Disadvantages

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Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)