Business IG:

CHAPTER 7:
ORGANISATION AND MANAGEMENT
2.2.1 DRAW, INTERPRET AND UNDERSTAND SIMPLE ORGANISATIONAL CHARTS
Introduction:
• Organisational structure: “the formal, internal, framework of a business that
shows how it is managed and organised.”
• Functional departments: “the main activities of business; finance, marketing,
operations, human resources and research and development.”
• Every business – even if its just two partners – needs to know their roles and
responsibilities and what the roles and responsibilities are of others in the
business. This will help the business operate efficiently.
 Simple organisation
charts:
• As all businesses grow, they
divide into separate
departments. Each of these
departments may specialise in
the main functional areas of
business such as marketing or
finance.
 THE MAIN FEATURES OF AN ORGANISATIONAL STRUCTURE ARE:
• Hierarchy: the number of levels in an organisational structure.

•
Simple Chain of command: the route through which authority is passed down through an
organisation.

hierarchy • Delegation: passing authority down through the organisational hierarchy to a subordinate.

•
structures: •
Subordinate: an employee who is below another employee in the organisation’s hierarchy.

Span of control: the number of subordinates reporting to each supervisor/manager.

- The difficulty of tasks; if the work that subordinates do involve simple and repetitive tasks,
then a wide span of control can be used. The more complex task subordinates do, the more
likely that narrow span of control will be used.

- The experience and skills of workers; highly skilled and experienced workers may require less
control than those who are less skilled and less experienced. The span of control will often be
wider when subordinates are more skilled and experienced.

- The size of the business; larger businesses are often able to afford to employ more managers
than smaller businesses. The span of control of individual managers in a large business is often
narrower than that for managers in small businesses.

- Levels of hierarchy; managers in tall organisation structures will usually have narrower spans
of control than managers in flat organisation structures.

- Management style; some businesses use a management style that has greater control over the
workforce than others. In this type of business, managers have a narrow span of control.
 Wide vs Narrow span of control:
Wide span of control: Narrow span of control:

Advantages: Disadvantages: Advantages: Disadvantages:

Less expensive as fewer Fewer Effective communication is Communication and

managers/supervisors managers/supervisors easier. decision-making is often
are needed. reduces promotion slower.
opportunities.

Less supervision Less control over Better control over workers More expensive because
improves worker subordinates’ work. and their work. more managers are
motivation. needed.

Faster communication Effective More managers/supervisors More supervision may

and decision-making communication may be increases promotion reduce worker
difficult. opportunities. motivation.
 • Tall or flat:
Organisational structures may be tall or flat
depending on the number of levels in the hierarchy.
Tall structures; have many levels of hierarchy. Each
Tall or flat level in the hierarchy, except for the bottom level, is
organisational a layer of management. This is due to the several
layers of management, and therefore more
structures: managers, the span of control for each managers
will be narrow. The chain of command is long.
Communication and decision-making are often
slower because they must pass through several
layers.
 • Delayering: reducing the size of the hierarchy by
removing one or more levels – most often middle
management.
• Decentralised: one where the decision-making
Delayering: powers are passed down the organisation to
lower levels.
• Centralised organisation: the power to make
decisions is held by the head office, or the centre.
 Centralised vs Decentralised organisations:
Centralised organisation: Decentralised organisation:
Advantages: Disadvantages: Advantages: Disadvantages:

- Decision-making is - Slower - Decisions are made - Decisions taken

often quicker. communication. based on local needs. might not be in the
- Decision are taken - Unable to respond - Can be used to train interests of the
for the benefit of the quickly to changes in junior management. whole business.
whole business. local markets. - Delegation helps to - Poor decision-
- Greater use of - May reduce worker improve worker making, might be
specialist staff motivation. motivation. because managers
improves decision- lack skills and
making experience.