Organisational Structure

4.2 million UK companies only have one worker – the owner.

Small businesses with one or two employees don’t need an organisational structure.

As a business grows it is more important that employees are organised.

This is often done by function (department) – Marketing, Finance, HR or Operations

The organisational structure

 Shows what each employee does in the business.

 Shows who reports to whom within the business.
 Ensures that each employee has a job to do and that all jobs get done
 It also ensures that no jobs get repeated.

Organisational Roles

Directors

 Establish business goals

 Set long term plans

Managers

 Work to achieve short term targets

 May be responsible for a particular function e.g., finance
 Use employees and resources in the best possible way

Team Leaders

 Help managers to achieve targets

 Make simple decisions such as allocating tasks amongst employees

Operatives

 Carry out basic duties e.g., working on the production line or serving customers

Organisations can have tall or flat structures; it depends on the number of levels of management in
the hierarchy.

 Many layers of management in the hierarchy

o Long chains of command
 Managers have narrow spans of control – not responsible for many subordinates
o They can keep a closer eye on workers which is good if workers are inexperienced or
low skilled
o It may be demotivational if workers are skilled and experienced and highly skilled
  Communication may be slower as there are lots of layers for messages to pass through
 Tall structures have more managers
o More opportunities for promotion – this could motivate some workers
o More managers salaries to pay so higher costs

Flat organisational structures

 Have less layers of management in the hierarchy and short chains of command
 Managers have a wide span of control – they are responsible for lots of subordinates
o Difficult to watch lots of workers which is bad if workers are inexperienced or low
skilled
o It may be motivational though if workers are experienced and highly skilled as they
will be left alone to do their job
 Communication may be quicker as there are less layers of management for messages to pass
through
 Flat structures have less managers
o Less opportunity for promotion
o Less managers salaries to pay

Occasionally businesses may delayer.

Advantages of Delayering Disadvantages of Delayering

Less managers = lower costs.
Delegation of responsibility down the hierarchy
may improve motivation.
Communication may benefit as they are now
shorter chains of command.
Remaining managers have increased workloads
= higher stress and lower motivation.
Motivation could suffer if remaining managers
are scared about losing their own jobs.
Delayering could cause wider spans of control
making it harder to monitor and control
employees

Relayering

 Sometimes, a business may decide to add layers of management to their hierarchy

 They might do this if they think that managers have too many workers to look after
 They may also do this if they think workers need closer supervisions
 Relayering means higher costs as there are more managers to pay
 Relayering leads to a taller organisational structure

Factors which affect whether to use a flat or tall structure

Skills of the workforce

More skilled workers may require less supervision so span of control can be wider =
flat structure

Management style

Managers who like to keep tight control will perform a narrower span of control =
tall structure
Competitive environment

A business in a competitive market may choose to keep costs low by employing less
managers = flat structure