Chapter 10 – Organizational Structure
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Why businesses need an internal structure
How structure changes when businesses
expand
How organizational charts describe internal
structures of an organization
Ideas of
◦
◦
◦
◦
◦
Hierarchical Structure
Chain of Command
Span of Control
Line and Staff Managers
Delegation

Business that are
◦ Centralized
◦ Decentralized

Different forms of decentralization

It refers to the
◦ Levels of management
◦ Division of responsibilities
…… within an organization

Shown on an
Organizational Chart


Main Tasks
Working
Conditions


Giving a subordinate the authority
to perform tasks
NOT THE FINAL RESPONSIBILITY
Authority to arrange the
shelves in the store.
Authority to order the stock.
Authority to arrange the
shelves in the store.
Increased trust in workers by supervisors &
managers.
Delegation must mean:
A reduction in direct control by supervisors &
managers once the tasks are done by workers.
Authority to arrange the
shelves in the store.
Advantages

Managers
◦ look after more
important jobs
◦ make less mistakes
◦ measure success of
staff more easily
Authority to arrange the
shelves in the store.
Advantages

Subordinate
◦ work more
interesting &
rewarding
◦ feel more important
◦ training for progress
◦ career opportunities
Authority to arrange the
shelves in the store.
Risk of Failure
Task completed better
Complete Control
Chief Executive
(Bill Murray)
Marketing
Director
Store Manager
Assistant Store
managers
Shop Workers
Purchase
Manager
Financial
Director
Human
Resource
Director
Book-keeping
Administration
Assistant


Hierarchy
Chief
Executive (Bill
Murray)
Marketing
Director
Departments
Store Manager

Chain of Command
Assistant
Store
managers
Shop Workers
Purchase
Manager
Financial
Director
Human
Resource
Director
Book-keeping
Administration
Assistant
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
Linkages
Chief Executive
(Bill Murray)
Communication channels
Position in organization
Taking orders
Accountability
Sense of belonging
Marketing
Director
Store Manager
Assistant Store
managers
Shop Workers
Purchase
Manager
Financial
Director
Human
Resource
Director
Book-keeping
Administration
Assistant
Chief Executive
(Bill Murray)
Marketing
Director
Store Manager
Assistant Store
managers
Shop Workers
Purchase
Manager

Financial
Director
Human
Resource
Director
Book-keeping
Administration
Assistant
Structure of the organization
which allows instructions to be
passed down from senior
management to the lower
levels
Chief Executive
(Bill Murray)
Marketing
Director
Store Manager
Assistant Store
managers
Shop Workers
Purchase
Manager

Financial
Director
Human
Resource
Director
Book-keeping
Administration
Assistant
The number of subordinates
working directly under a
manager
Longer Chain of Command
Taller Organizational
Structure
Narrower Span of Control
Shorter Chain of Command
Shorter Organizational
Structure
Wider Span of Control
Longer Chain of Command
Taller Organizational
Structure
Narrower Span of Control
Features
Supervisor/Manager
responsible for low
amount of
subordinates
 Less delegation
 More control over
subordinates
 less watchfulness
for the subordinates
Longer Chain of Command
Taller Organizational
Structure
Narrower Span of Control
Features
Communication
 Slower & less accurate
 message through many
levels
Workers less trusted
Make less decisions
Less job satisfaction
 Less room for
mistakes

Features
Supervisor/Manager
responsible for many
subordinates
More delegation
Less direct control of
subordinates
Leads to job
enrichment
Shorter Chain of Command
Shorter Organizational
Structure
Wider Span of Control
Features

Communication
 quicker & more accurate
 message through fewer
levels
Workers more
trusted
Make more decisions
More job satisfaction
 More room for
mistakes

Shorter Chain of Command
Shorter Organizational
Structure
Wider Span of Control
STAFF MANAGERS
• Specialists in their area
• Offer advice & support
• Report to Board of
Directors (BOD)
• Very qualified experts
Chief
Executive
IT Manager
Production
Director
Financial
Food and Process
Factory Managers
Financial
Accountant
Factory Workers
Director
Book-keeper
Economic
Forecaster
Marketing
Purchasing
Director
Specialist Product
Buyers
Specialist Product
Buyers
Director
Sales Manager
Store Manger
Assistant Store
Manager
Shop Workers
Head of French
Division
Human Resource
Director
Administration
Officer
FUNCTIONAL DEPARTMENTS
• One important responsibility
• Specialist skills
• Often efficient
•Loyal to their department
(maybe not to the whole company)
• MANAGERS in these departments are
called LINE MANAGERS
Chief
Executive
IT Manager
Production
Director
Financial
Food and Process
Factory Managers
Financial
Accountant
Factory Workers
Director
Book-keeper
Economic
Forecaster
Marketing
Purchasing
Director
Specialist Product
Buyers
Specialist Product
Buyers
Director
Sales Manager
Store Manger
Assistant Store
Manager
Shop Workers
Head of French
Division
Human Resource
Director
Administration
Officer
REGIONAL DIVISIONS
• Look after stores in
other countries
• Specialist knowledge
of the local market
• Popular products in
given country
• Legalities
Chief
Executive
IT Manager
Production
Director
Financial
Food and Process
Factory Managers
Financial
Accountant
Factory Workers
Director
Book-keeper
Economic
Forecaster
Marketing
Purchasing
Director
Specialist Product
Buyers
Specialist Product
Buyers
Director
Sales Manager
Store Manger
Assistant Store
Manager
Shop Workers
Head of French
Division
Human Resource
Director
Administration
Officer
FUNCTIONAL DEPARTMENTS
• One important responsibility
• Specialist skills
• Often efficient
•Loyal to their department
(maybe not to the whole company)
• MANAGERS in these departments are
called LINE MANAGERS
Chief
Executive
IT Manager
Production
Director
Financial
Food and Process
Factory Managers
Financial
Accountant
Factory Workers
Economic
Forecaster
Marketing
Purchasing
Director
Director
Specialist Product
Buyers
Book-keeper
STAFF MANAGERS
• Specialists in their area
• Offer advice & support
• Report to Board of
Directors (BOD)
• Very qualified experts
Specialist Product
Buyers
Director
Sales Manager
Store Manger
Assistant Store
Manager
Shop Workers
Head of French
Division
Human Resource
Director
Administration
Officer
REGIONAL DIVISIONS
• Look after stores in
other countries
• Specialist
knowledge of the
local market
• Popular products in
given country
• Legalities


Staff Managers provide advice to line
managers on particular issues
Line managers have opportunity to
concentrate on their main tasks
Chief
Executive
IT Manager
Financial
Production Director
Director
Food and Process
Factory Managers
FUNCTIONAL
DEPARTMENTS
LINE MANAGERS
Financial
Accountant
Factory Workers
Economic
Forecaster
Marketing
Purchasing Director
Specialist Product
Buyers
Specialist Product
Buyers
Book-keeper
Sales Manager
Head of French
Division
Administration
Officer
Store Manger
Assistant Store
Manager
STAFF MANAGERS
Human Resource
Director
Director
Shop Workers
REGIONAL
DIVISIONS

Conflict & frustration between the two groups


Different points of view on matters
Line employees confused about who to take
orders / instructions from
Chief
Executive
IT Manager
Financial
Production Director
Director
Food and Process
Factory Managers
FUNCTIONAL
DEPARTMENTS
LINE MANAGERS
Financial
Accountant
Factory Workers
Economic
Forecaster
Marketing
Purchasing Director
Specialist Product
Buyers
Specialist Product
Buyers
Book-keeper
Director
Sales Manager
Store Manger
Assistant Store
Manager
STAFF MANAGERS
Shop Workers
Head of French
Division
Human Resource
Director
Administration
Officer

Decentralized
◦ Many decisions
delegated to lower
levels of
management

Centralized
◦ Most decisions by the
center
 Higher levels of
management
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Important Issues
Investment Projects worth a
large sum of money
Taking over of other
businesses
Overall aims and objectives
of the business
Firm’s Growth Strategy
Environmental Objectives
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Decisions made by
those that are “close to
the action”
Delegation makes lower
level management
◦ Feel more trusted
◦ More Job Satisfaction

Quicker Decision
Making
Marketing
Production
Company
Finance
Human
Resources
Cars
Pick-ups
Vehicle
Manufacturing
Vans
Trucks
Asia
Multinational
Company
USA
Middle East
Europe
First Class
Aircraft
Design
Business
Class
Premium
Economy
Economy
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
Draw & explain the significance of a simple
organizational chart
Understand the changes that occurs to a
business when the business expands
Know the difference between
◦ Span of Control
◦ Levels of Hierarchy
◦ Line and Staff Managers


Understand the importance of delegation
Analyze the difference between a centralized
and decentralized Organization

Explain the different forms of
decentralization
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Organizational Structure