Chapter 23: Organisation Structure and Employees

Organisational Charts:
- If workers are organised into a structure made up of different functions
or departments, it's easier to run a business
An organisation chart shows:
- How the business is split into functions and departments
- The roles of employees and their job titles
- Who is responsible
- To whom the employees are accountable
- The various communication channels
- The relationship between different positions in the business

1. Formal Organisation - the internal structure of a business shown by an

organisation chart
2. Organisational Chart - a diagram showing the different job roles in a
business and how they relate to each other
3. Hierarchy - the order of levels of responsibility in an organisation from
the lowest to highest

1. Authority - the right to command and make decisions

2. Payroll officer - someone who is responsible for the administration of
workers pay in the organisation

● The roles played by the employees vary with the size of the organisation
Directors:
- Appointed by the owners to run the business
- With the chairperson, a board of directors is formed
- The board of directors make all important decisions
- A director is assigned to each department and they are accountable to
the chairperson
- The director also possesses authority over managers in levels before
them
Managers:
- Have a number of functions and is responsible for planning, controlling,
organising, motivating, problem solving and decision making for the
business
- The overall role of a manager is to achieve the objectives of the owners
effectively using the resources available
- They are leaders and aid in guiding and shaping the business
Supervisors:
- Supervisors monitor the work of employees in their particular area and
they have authority over the general employees and operatives
- They carry out managerial duties but at a lower level
Operatives:
- Operatives are skilled workers and involved in the production process
- They are accountable to supervisors or managers
- They are often shown in the lower hierarchy level but have more status
as they are skilled
General Staff:
- Business employs staff that don’t possess any specific skills
- However, these employees with adequate training perform a variety of
tasks and gain promotions to other positions
- They don’t have any authority
Professional Staff:
- Highly skilled and highly trained staff
- Organisation charts differ for businesses who employ lots of professional
staff

1. Accounts clerk - someone who keeps records or accounts in an office

2. Chain of command - route through which orders are passed down in the
hierarchy

Chain of command:
- The chain of command is displayed by organisation charts
- Orders will pass from the higher to lower levels of the hierarchy
- Information may flow back from the lower to higher levels of the
hierarchy
If the chain of command is too long:
- Messages may get lost or confused as they pass up and down through
the chain of command
- Changes might not be accepted lower down the chain
- Therefore, having too many links in the chain increases the risk of
instructions not being implemented

1. Subordinate - people in the hierarchy who work under the control of a

more senior worker
2. Delegation - authority to pass down work from superior to subordinate
3. Span of control - the number of people a person is directly responsible
for in a business
4. Centralised - the type of organisation system where most decisions are
made at the top of the organisation and then passed down the chain of
command
5. De-centralised - the type of organisation system in which most decisions
are

Span of control:
- The number of people or subordinates a person directly controls is called
the span of control.
- If a business has a wider span of control it means that a person controls
relatively more subordinates
- If someone has a narrow span of control controls fewer subordinates
- If the span of control is higher than 6, it is difficult for the employee
supervising

Flat and Hierarchical(Tall) Structures:

1- Flat Structure:
- means there are fewer layers in the hierarchy
- The chain of command is short but the span of control is wide
- Communication is better as the chain of command is short
- Management costs are lower because of the fewer layers in
management
 - Control may be friendly and less formal as there is more direct contact
between the different layers
2- Hierarchical Structures:
- Communication may be poor through the whole structure due to the
long chain of command
- Management costs will be higher
- There may be a clear route for promotion and this might help in
motivating employees
- Control may be less friendly and more formal as there many layers in the
hierarchy

Delegation
- At times the manager may assign a more complex task to a subordinate.
This is delegation
- The manager will still be responsible for the overall task
- At times delegation aids in motivating workers because they feel trusted
to carry out more difficult tasks
- However if workers feel they are doing difficult tasks without any
rewards they might feel demotivated
- The extent of delegation depends if the decision making is centralised or
decentralised

Centralised - if employees have no authority at all in a business in decision

making
De-centralised - if employees have the authority to make decisions

Centralised Decision making:

Advantages Disadvantages

- The senior management has - Employees may feel

complete control over demotivated or dissatisfied
resources without any authority

- The senior managers are - It leads to less creativity and

 trained and experienced in fewer ideas
decision making

- It prevents parts or various - Procedures may be needed to

departments of the business make decision making easier
acting independently

- Coordination and control is - People at the top of the

easier hierarchy may not be aware of
the needs of the customers
served by more local
employees

Decentralised Decision Making:

Advantages Disadvantages

- Workers have more autonomy - Senior managers may lose

and may be better motivated control of resources

- It speeds up decision making - Costs may rise due to less

standardisation and more
variability in decision making

- It takes the pressure off senior - Some employees may not

managers and reduces their possess the ability to make
workload decisions

- Employees get the opportunity - Some employees may not

to be creative and share ideas welcome the extra
responsibility

- It provides more promotion ___

opportunities at the different
managerial levels

Organisational Charts and Growth:

- As a business grows, the formal organisation is likely to change
- Most business start small, and have an entrepreneurial structure and
most decisions are made directly by the owner and “key” workers
 - As the business grows a traditional structure may be introduced and will
be based on hierarchy and decision making will be shaped throughout
the business
- In some business a matrix structure is favoured and employees are put
into teams that cut across departmental roles and the employees may
work together on tasks

Large VS Small businesses:

Small businesses don’t usually need a formal organisation because the
workforce is small, employees will be knowing what their colleagues are
working on and they will be accountable to the same person. However in large
businesses the workforce is big, and they need a formal organisation. In the
absence of a formal organisation, the business may be difficult to control.