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Organizational
Structure
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Organizational Structure
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It is the internal formal framework of a
business that shows the way in which
management is organized and linked
together and how authority is passed through
an organization.
It helps a business to function more efficiently
due to:
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Accountability: the extent to which a person is
held responsible for the success or failure of a
task.
Responsibility: who is in charge of whom.
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Job Roles
CEO
Director
Director
Manager
Manager
Supervisor
Operative
Supervisor
Operative
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Job Roles
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The CEO:
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Act as a figurehead or ambassador for the org.
Lead the team of directors
Represent the desires, ideas and beliefs of the
directors
Formulate organizational objectives and policies
with the BOD
Communicate with the BOD regarding any
problems and decisions that need to be made
Devise and implement business strategy.
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Job Roles
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The Board of Directors (BOD):
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Target setting
Devising long-term plans
Establishing organizational policies & codes of
practice
Monitoring & controlling the org. activities
Overseeing staffing issues
Advising and supporting the CEO
There are two main types of directors:
executive and non-executive
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Job Roles
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Managers:
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They are responsible for a team of people and/or
certain tasks
Implementation of the organizational policy
Assist the board of directors
Supervisors and team leaders:
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Responsible for making daily operational
decisions
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Job Roles
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Other employees (operatives):
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Work to achieve targets set by their line manager
or department manager
Work as a member of a team or department
Make routine decisions concerning their job role
only
Provide support and assistance to other people
in the organization
Types of Organization
Charts
Organisation Charts
Vertical downward
communication
President
Vice President
Production
Vice President
Finance
Vice President
Marketing
Vertical upward
communication
Manager
A
Manager
B
Manager
C
Manager
D
Manager
E
Exhibit 6.2
Manager
F
Manager
G
Manager
H
Manager
I
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Organisation Charts
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Organisational chart : diagrammatic
representation of firm's formal org. structure.
The organisational chart shows:
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The different functional departments of a business.
The levels of hierarchy.
The chain of command.
The span of control.
Formal channels of communication.
Who has responsibility for decision-making.
Identity of the supervisor or manager to whom each
worker is answerable and should report to.
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Key Terminology
The hierarchy in a business refers to the
organisational structure based on a ranking system.
Each hierarchal level refers to a different rank with
its associated degree of authority and responsibility.
● Chain of command is the line of authority from the
top to the bottom of the organization, which is shown
in an organization chart
● Delayering is the process of removing levels in the
hierarchy to flatten the organizational structure.
● Span of control refers to the number of
subordinates overseen by a manger, i.e. the
number of people who are directly accountable to
the manager.
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Tall (Vertical) Organisation Charts
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A tall (or vertical) organization structure
means that there are many layers in the
hierarchy and hence managers have a narrow
span of control.
Its advantages are:
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There is quicker communication between smaller
teams
Feedback from subordinates should be more
effective
Clearer (but longer) lines of communication between
the different layers of management
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Tall (Vertical) Organisation Charts
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Smaller teams are easier to control and manage
Greater specialisation and division of labour can
help increase efficiency and productivity
There are greater opportunities to earn promotion
- more levels exist in the hierarchy
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Bureaucracy
It is the official administrative and formal rules of an
organisation that govern business activity. It
involves prescribed rules and policies, standardised
procedures, and formal hierarchal structures.
● It might include:
● the frequent requirement to fill out unnecessary
paperwork
● staff working in multiple departments
● too many committees set up to investigate issues
of concern
● long, official chains of command
● managers with overlapping roles
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Bureaucracy
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Bureaucratic organisations are governed by:
● Continuity
● Rules and regulations
● Hierarchal structures
● Accountability
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Delayering
Advantages of
Delayering
• Reduces costs
Disadvantages of
Delayering
• Creates anxiety and
a sense of insecurity
• Improves the speed • Overloads staff
of communication
• Encourages
delegation and
empowerment
• Decision-making can
take longer
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Flat (Horizontal) Organisation Charts
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A flat (or horizontal) organizational
structure means that there are only a few
layers in the formal hierarchy and hence
managers have a relatively wide span of
control.
Its advantages are:
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Delegation becomes a relatively important part of
managing an organisation - extra responsibilities
for subordinates and, therefore, faster career
development.
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Flat (Horizontal) Organisation Charts
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Communication may be improved overall since
there are fewer layers in the hierarchy.
It is cheaper to operate a wider span of control
because there are fewer levels of management
(management functions will be eliminated or
delegated).
Smaller 'psychological distance' between those
at the top and those at the bottom of an
organisation - perhaps reducing an 'us and them'
culture where workers feel alienated from senior
management
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Delegation
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Delegation is the empowerment of authority
of a person lower down in the organizational
structure.
Benefits of delegation:
● The manager can focus more on the
strategic issues facing the organisation.
● Delegation can motivate and develop
employees who feel that they are trusted.
Poor delegation causes confusion and a
feeling of inadequacy.
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Delegation
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SMARTER Delegation:
● Specific
● Measurable
● Agreed
● Realistic
● Time-bound
● Ethical
● Recorded
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Narrow or Wide Span of Control?
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The degree of control granted to a manager
depends on several factors (MOST):
● Manager
● Organisational culture
● Subordinates
● Task
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Centralisation & Decentralisation
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Centralised structures occur when the majority of
decision making is done by a very small number of
people who hold decision making authority and
responsibility.
The decision to centralise or decentralise a business
depends on:
● The size of the organisation
● The scale of importance of the decision
● The level of risk
● The corporate culture
● Management attitudes & competences
● The use of ICT
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Centralisation
Advantages
Disadvantages
Rapid decision-making
Added pressure for senior
staff
Better control
Inflexibility
Better sense of direction
Possible delays in
decision-making
Efficiency
Demotivating
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Decentralisation
Advantages
Input from the workforce
Disadvantages
Costly
Speedier decision-making Inefficiencies
Improved morale
Greater chances of
mistakes
Improved accountability
Loss of control
Teamwork
Communication issues
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Organizational by product, function or
region
● Functional
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involves organizing departments around essential
input activities, such as:
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production and operations
finance and accounting
marketing and sales
human resources
● Product
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Organization
(Service) Organization
involves organizing departments around goods
and services provided
● Organisation
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by Region
involves organizing departments in each area in
which the enterprise does business
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Organization by Function
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Organization by Product
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Organization by Region
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Matrix Structure
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A matrix structure refers to a flexible type of
organizational structure of representatives from different
departments, temporarily working together on a
particular project or job.
Functional departments still exist, although the project
team has the opportunity to work with colleagues from
other departments.
Each member in the matrix organization is held
accountable to two managers – their official department
(or line) manager and their project manager.
It is the aptitudes and attitudes of team members in
matrix structures that are important, rather than their
formal rank in the official organizational structure.
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Matrix Structure
Advantages
Improved
communications
Disadvantages
Added workloads
Maximizes skills set of the Difficult to coordinate
workforce
Cost effective
Time consuming
Changes in
Organisational Structures
(HL ONLY)
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Project-Based Organisation
● Project-based
organisations organise human
resources around particular projects, each led
by a project manager. Such structures allow
businesses increased flexibility to adjust
quickly to market changes and to adopt rapid
innovations.
● A matrix structure refers to the flexible
organisation of representatives from different
departments temporarily working on a
particular project.
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Project-based Organisation
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Project-Based Organisation
Advantages
Disadvantages
Flexibility
Discontinuity
Productivity
Isolation
Efficiency
Inefficiencies
Motivational
Conflicting interests and
priorities
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Handy’s Shamrock Organisation
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Shamrock’s model consists of 3 groups of workers:
● Core staff
● Peripheral workers
● Outsourced workers
Core workers are well motivated & productive,
however, they must be well paid.
Peripheral workers are flexible and easy to hire &
fire, however, they lack job security.
Outsourced workers are experts but they are
relatively expensive.
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Organisational Structure & Concepts
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Strategic factors affecting the organizational
structure:
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The size of the business
Employee competencies
Management attitudes
The history and culture of the business
The impact of change on restructuring decisions.
The impact of innovation in the use of ICT on
communication
The impact of globalisation on organisational
structures