IB Business and Management

2.2 Organisational Structure

• Open 2.2 Outline• Today’s objectives:– Examine job roles– Discuss different types of organisation structure

Organisational Structure

• Refers to the ways that businesses organise their human resources (employees)

• As businesses grow there is a growing need for the structure to be formalised

CEO/MD

Board of Directors

Management

Supervisors

Other Employees (Operatives)

Senior management

Middle management

Junior management

Company Hierarchies

Pa

y a

nd

Au

tho

rity

• CEO/Chairperson: Responsible for day-to-day operations.

• Leads & represents the board.

CEO/MD

Board of Directors

A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization on behalf of the shareholders

These directors could include:• A Chief Executive Officer (CEO) who may also be

Chairman of the Board• Other executives of the organization, such as its Chief

Financial Officer (CFO) or Executive Vice President• Large shareholders• Representatives of other stakeholders such as labour

unions, major lenders, or members of the community in which the organization is located

• Outside directors

Board of Directors – Home Retail Group

Board of Directors - Roles

• governing the organization by establishing broad policies and objectives;

• selecting, appointing, supporting and reviewing the performance of the chief executive;

• ensuring the availability of adequate financial resources;

• approving annual budgets;• accounting to the stakeholders for the

organization's performance;• setting the salaries and compensation of

company management.

Managers

• Management: Responsible for a certain task or team of people (HR, finance, marketing, etc.) & day-to-day implementation of organisation’s policy

Supervisors

• Junior managers who carry out operational decisions & directly contact workforce.

Other Employees (Operatives)

• Considered the workforce. Cashiers, secretaries, laborers, teachers, etc. Make routine decisions concerning their job only. Provide support to others in organisation & work as member of a team or department.

Delegation

Refers to passing authority & control on to others. Manager retains responsibility, but the subordinate does the work.

What are the benefits of delegation?

Why might a manager be reluctant

to delegate?

Organisational Charts

• Most businesses create a formal, organized structure to delineate accountability & responsibility

• Accountability: shows who answers to whom• Responsibility: shows who is in charge of

whom

Organisation Chart Terminology

• Person directly above an employee is known as the line manager.

• The people who a manager has direct control over is called a subordinate.

Organisational Chart

Shows 4 important features:1. Functional departments within a business

(marketing, finance, etc.)2. Chain of command: which people have

authority over others3. Span of control: number of subordinates

directly accountable to a single manager4. Official channels of communication: route

that messages are to be communicated within an organization

M arke tin g D ep artm en t1 2 E m p loyees

M arke tin g M an ag er

M arke tin g D irec to r

P rod u c tion S ta ff4 0 E m p loyees

Q u a lity C on tro l M an ag er

O p era tion s M an ag er

S ecu rity S ta ff2 0 E m p loyees

S ecu rity M an ag er

P rod u c tion D irec to r

F in an ce S ta ff1 5 em p loyees

F in an ce M an ag er

F in an ce D irec to r

H R S ta ff1 0 E m p loyees

H R M an ag er

H R D irec to r

C E O

Organisational Chart Example

Span of Control

• Is described as either being:

• Wide = Each manager has lots of subordinates

• Narrow = Each manager has few subordinates

Task

• Group A:Think of advantages and disadvantages of a

Wide Span of control

Group B:Think of advantages and disadvantages of a

narrow span of control

Chain of Command

Refers to the formal line of authority through which orders are passed down in an organization.

Flat organization = short chainTall organization = long chain

Task – In groups

• I will show a picture to one person in your group

• They then have to re-draw it for the next person

• They then have to re-draw it for the next person

• etc

M arke tin g D ep artm en t1 2 E m p loyees

M arke tin g M an ag er

M arke tin g D irec to r

P rod u c tion S ta ff4 0 E m p loyees

Q u a lity C on tro l M an ag er

O p era tion s M an ag er

S ecu rity S ta ff2 0 E m p loyees

S ecu rity M an ag er

P rod u c tion D irec to r

F in an ce S ta ff1 5 em p loyees

F in an ce M an ag er

F in an ce D irec to r

H R S ta ff1 0 E m p loyees

H R M an ag er

H R D irec to r

C E O

Organisational Chart Example

Task

• Spurs Mystery• Use the information and draw the firm’s

organisation chart

Task

• BISS organisation chart• Who fills the positions in the organisation chart• How has the structure of the school changed

since this chart was drawn up? Why?

Flat and Tall Structures

• Depending on how the business is organised, a business can have a tall or a flat structure.

• Consider the example of an organisation with 52 workers

Tall StructureMD

Finance Manager

Finance Supervisor

3 Finance Assistants

Accounts Manager

4 Accounts Clerks

8 Data Entry operators

Human Resource Manager

Training Manager

2 trainers

Marketing Manager

2 Marketing Supervisors

4 marketing Assistants

Operations Manager

3 Shop Floor Supervisor

18 shop floor

workers

Flat Structure

MD

Finance Manager

18 Finance Assistants

Human Resource Manager

3 trainers

Marketing Manager

6 marketing Assistants

Operations Manager

21 Shop Floor

Workers

Questions – Discuss and decide

Which type of organisation (flat, tall, wide, narrow) will:

• Have good opportunities for promotion• More likely to have stressed managers• Have quick vertical communication• Workers may feel over supervised• Workers may be delegated additional responsibilities• Problems spotted on the shop floor will be dealt with

quickly by management• Likely to be large organisations• Workers may feel unsupported• Response to problems may be slow•

Factors Affecting Choice of Structure

•Business size (larger firms require a more formal structure and are likely to be tall)

•Employee competence (business with highly skilled workers can have flat, informal structure)

•Management Attitudes (managers that trust their staff are more likely to have a flat, flexible structure)

•History & culture (innovative firms accustomed to change may opt for more flexible structure)

•Results: reduces the number of layers of management & widens the span of control•Purpose: reduce cost, improve communication speed, give employees more responsibility

Changing/Reorganizing Structure

Delayering: removing one or more levels in the hierarchy in order to flatten out organizational structure (employees are moved around)

HIERARCHICAL STRUCTURE

COMPANY OWNER

MANAGERS

DEPARTMENT MANAGERS

SUPERVISORS

SHOPFLOOR WORKERS

DE-LAYERINGFlatter StructureFe

edba

ckDel

egat

ion

Cha

in o

f

Com

man

d

Advantages of delayering

• Reduces costs – wage costs of middle management

• Motivates employees lower down the hierarchy by giving them more responsibility, authority and control

• Communication may improve, as there are less levels to pass information through

• Can produce good ideas from employees who otherwise wouldn’t have a say

• Improves responsiveness, as senior managers and customers are closer.

Disadvantages of Delayering

• Can lessen performance, as knowledge and experience of middle management is lost

• Not all organisations suited to a flat hierarchy

• Has a negative impact on motivation in the short term – job losses

• Disruption period, due to people taking on new responsibilities

• Remaining managers have a wider span of control, which means they can lose focus

• New responsibilities could mean more stress.

Downsizing: reducing the size of the workforce (employees are laid off)

Changing/Reorganizing Structure

• Purpose/results: reduces cost• Drawbacks: creates sense of insecurity, can over-stretch employees (decreasing quality of work), can increase decision-making time if teams are larger