HOW ARE BUSINESSES ORGANISED?
All organisations have certain things in common
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They have a name
They have an image
They have rules and regulations
They use resources including people
Organisations range from small corner shops to very large
organisations such as Plcs – we judge the size of organisations
in many ways:
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number of employees
size of profit
how many branches
how much it produces
whether it is well-known or local
The size of an organisation cannot be measured by just one of
these but a range of the indicators of size – a small
organisation may well make a very large profit.
The employees in an organisation carry out many different
activities. Organisations group similar activities together into
Functional Groupings. Within these functional groupings the
employees will carry out activities which relate to that
grouping.
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The main functional groupings we study are:
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Marketing
Finance
Operations
Human Resources
Depending upon the organisation and the work carried out
there, they may have different names for the groupings or
have different ones eg Research and Development,
Administrative Support. We often call these groupings
Departments.
MARKETING
The activities within this department cover all the
ways in in which the business makes sure that its
product or service meets needs of consumers and
is what consumers want to buy.
The Marketing Departments main aims are to:
 satisfy consumer wants
 identify consumer needs
 anticipate consumer wants
Within marketing there are the 4Ps – Marketing Mix:
 Price
 Product
 Place
 Promotion
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The marketing department should work at ensuring that all the
elements of the marketing mix are just right to try and ensure
success of the product and the organisation.
The activities within marketing begin right at the beginning of
creating the idea for a product, through to advertising and
promoting the product, selling the product right through to
when the product is in the consumers home with after sales
care.
HUMAN RESOURCES
This department is involved with the employees
the organisation. The Human Resources
Department main responsibilities are:
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of
keeping personnel records
staff welfare
selection and recruitment of new staff
hiring staff
dealing with grievances
training and development of staff
staff appraisal
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OPERATIONS/PRODUCTION
This involves the way in which organisations take raw materials
and process them and turn them into finished products.
I
P
INPUTS
(raw materials)
PROCESS
(carrying out activities
to make changes to the
raw materials)
O
OUTPUT
(finished
product
or service)
This department should ensure that the right quantity
of finished products is produced at the right time to
meet consumer demand.
FINANCE
This department must keep accurate records of all money
transactions within the organisation. It is important that
all businesses keep their finances in order – otherwise
they may get into financial trouble.
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The main responsibilities of the Finance Department are:
financial planning
cash flow
budgets
drawing up of final accounts (trading, profit and loss
accounts and balance sheets)
 break even analysis
 sources of finance
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Administrative support is also an essential area within an
organisation and their main responsibilities are:
 filing – paper files an electronic files
 correspondence – communication through word
processing, phone, fax and e-mail;
 diary – recording of meeting dates, visitors etc
 reprographics – photocopying
 organising meetings and travel
ORGANISATIONAL STRUCTURES
All organisations have a structure, it describes the way in
which organisations group their activities and shows the way in
which those activities are carried out.
A visual representation of an organisation structure can be
shown in an Organisation Chart.
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Managing
Director
Marketing
Manager
Sales
Assistants
Marketing
Assistant
Finance
Manager
Accounts
Clerks
Cashier
Operations
Manger
Production
Assistants
Assemblers
Human
Resources
Manager
Training
Assistants
Personnel
Assistant
Above is an example of a simple organisation chart.
An organisation chart provides information about the
organisation and how it is run.
 We can see that the Managing Director is in charge of
the whole organisation.
 The Managers of each department are directly
responsible to the Managing Director – this is shown by
the vertical line. This is called a line relationship.
 The managers of each department have authority over
the positions below them in the chart – their
subordinates – again this is a line relationship.
 The subordinates in each department are responsible to
their line managers.
 The departmental managers and the workers in each
department are all on the same level and have the same
degree of responsibility – the horizontal lines are called
lateral relationships.
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ROLES AND RESPONSIBILITIES
Lines of Authority – show the seniority within an organisation.
The higher up the organisation chart a person is then the more
responsibility that person will have.
Line Relationships - show the way in which one person is in
charge of another – these are represented by the vertical lines
on the organisation chart.
Functional Relationships – this shows how a department
provides a service for other departments. For example, there
is a functional relationship between the human resource
department and the marketing department when a vacancy in
the marketing department occurs then the human resource
department will advertise the job, help with interviews etc.
Lines of Responsibility – these are different from lines of
authority. Authority basically means you can tell people what
to do, responsibility means you may have to take the blame for
other people’s mistakes.
Lines of Promotion – show how employees further down the
organisation can move up the ladder.
Chain of Command – shows how instructions and orders move
down an organisation.
Hierarchy – refers to the number of levels in an organisation –
we look at tall structures and flat structures.
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We can represent the “shape” of an organisation through
pyramid structures – 2 main types
TALL STRUCTURES
This is a representation of a tall structure
Features of a tall structure
 more layers of management – hierarchy – lots of
management salaries to pay
 more opportunities for promotion – therefore greater
motivation to do well
 more line relationships
 closer supervision of work as there are more managers –
this can lead to fewer mistakes – narrow span of control
 less chance of subordinates using their own initiative
 longer lines of communication – so communication can be
quite slow
Examples of organisations with a tall structure – Army,
Hospitals, Police, government organisations.
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Many organisations have moved towards a flatter structure
This is a representation of a flat structure
Features of a flat structure
 Work is usually carried out in teams
 Less supervision – can lead to greater motivation as
employees feel more trusted – wide span of control
 more mistakes can occur due to less supervision
 Short chain of command
 Short lines of communication – speeding up of
communication
 Few levels in the hierarchy – fewer management salaries
to pay
 Less chance of promotion
Examples of organisations who may have a flat structure – Bus
Company, charity, employment agency, farm.
Span of Control – a span of control refers to the number of
people a manager manages or supervises.
Tall structures have a narrow span of control as there are
more managers who usually have between 2-5 people under one
manager.
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Advantages – it is easier to oversee workers, strong lines of
communication exist between managers and their staff and
members of staff know their line manager.
Flat structures have a wide span of control as there are fewer
managers to supervise the staff,
Advantages - there is more trust between managers and their
staff to get things done, staff can use their initiative and so
can be more motivated.
STAKEHOLDERS
Stakeholders are individuals or groups of individuals with an
interest in the success of an organisation.
Stakeholders in an organisation may include:
Shareholders
Inland Revenue
Government
Employees
Customers
Suppliers
Management
Local Community
The firm and its stakeholders may have different views about
success and how to achieve that success. There can sometimes
be conflict between what they want.
For example
 employees may want a pay rise but shareholders may want
a bigger dividend
 customers may want longer opening hours but
management wants to cut wage bills
If the firm wishes to be successful it has to balance the
wishes of its stakeholders.
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