Organisational Structure

of a Business

Why Do Businesses Need to be

Organised?
Small businesses (particularly sole traders) have an informal
organisational structure
As a business gets bigger then it starts to form some kind of
organisation
An organisation structure is required as soon as there are
several people working in the business
The structure determines:
Who is responsible for what job and
Who is responsible to whom.

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GCSE Business Studies

Hierarchy
Describes management structure of business
From top of company managing director, through to shop
floor worker
Usually best understood by drawing an organisation chart
Shows which levels of management and employees report to
whom

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GCSE Business Studies

Example of a Hierarchy

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GCSE Business Studies

Span of Control
What is the Span of Control?
The number of people who report to one manager in a hierarchy
The more people under the control of one manager - the wider
the span of control
Less means a narrower span of control

Example below shows a span of control of 4 for the Marketing

Manager
Marketing
Manager
Marketing
Assistant

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Market
Researcher

Telesales
Supervisor

Customer
Care Assistant

GCSE Business Studies

Advantage of a Narrow Span of

Control
Allows a manager to:
Communicate quickly with employees under them
Control employees more easily

Feedback of ideas from workers more effective

Requires a higher level of management skill

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GCSE Business Studies

Advantage of a Wide Span of Control

There are less layers of management to pass a message
through
So the message reaches more employees faster
It costs less money to run a wider span of control because a
business does not need to employ as many managers

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GCSE Business Studies

Tall and Flat Organisations

Tall organisation
Large number of managers
Narrow spans of control
Can suffer from having too many managers (expensive)
Decisions can take a long time to reach bottom of hierarchy
Can provide good opportunities for promotion
Manager does not have to spend so much time managing staff

Flat organisation
Few managers
Wide span of control

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GCSE Business Studies

Centralised Organisations
What are they?
Organisations where important decisions are taken at the centre
and then passed out to the various departments / locations

Advantages
Tight control of decisions
Decisions made by senior management
Helps decisions to be consistent across the business
Avoids repetition of functions (e.g. only one purchasing
department)

Disadvantages
Lack of motivation for managers
Central management may be out of touch
May be slow to make decisions that need to taken quickly
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GCSE Business Studies

De-Centralised Organisations
What are they?
Organisations where important decisions are delegated to
managers in other departments / locations

Advantages
Increased motivation of managers
Encourages local initiatives
Decisions based on more up-to-date information
Decisions made quicker

Disadvantages
Managers may lack experience
Local decisions may be inconsistent with the overall business
aims and objectives
Duplication of functions and costs
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GCSE Business Studies

Chain of Command
Line on which orders and decisions are passed down
From top of hierarchy to bottom
Example
Managing
Director
Production
Director
Production
Manager
Factory
Supervisor
Machine
Operators
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GCSE Business Studies

Importance of Effective Delegation

Delegation is giving authority for certain decisions to those
below manager
Gives manager more time to work on other aspects of
business
Also plays an important part in increasing job satisfaction and
motivation of employees

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GCSE Business Studies

Main Departments in a Manufacturing

Business
Production

Makes sure that production plans are met on time and

products of right quality are produced

Accounts

Provides a detailed record of money coming in and going

out of business
Prepares accounts as a basis for financial decisions

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Sales and
Marketing

Sales - deals with all aspects of selling to customers

Purchasing

Buys all raw materials and goods required for production

Human
Resources

Deals with all recruitment, training, health and safety

Marketing - carries out market research, organises

advertising and product promotion

Handles pay negotiations with unions/workers

GCSE Business Studies