Organisational structure
Internal organisation of firms
In small firms:
Each worker may undertake a range of roles
The structure may be informal and fluid
As firms grow bigger:
The roles and responsibilities of each worker must
become clearer
A more formal structure is necessary
Functional areas
A function is the specific job of a person or department.
The main functional areas in organisations are:
Finance
Human resources
Sales & marketing
Production and operations
Organisation structure
Organisation charts - pictorial representations of
the job roles and lines of responsibility within a
business.
Hierarchy – an organisation structured in layers,
with those at the top having greater authority than
workers in lower levels
An organisational chart
Organisation structure
Span of control – the number of workers one
manager is directly responsible for
Chain of command – the line down which
instructions are passed through the layers in the
hierarchy
Tall organisations
These have:
Many layers
Small spans of control
Characteristics of tall organisations:
High levels of control (appropriate
for unskilled workers)
More opportunities for promotion
Poor communication as information has
to pass through the many layers
Flat organisations
Flat organisations have:
Few layers
Large spans of control
Characteristics of flat organisations:
Low levels of control (suitable for skilled, experienced
& motivated workers)
Better communication
Managers must delegate work due to larger spans of
control, motivating employees
Delayering
Delayering involves removing one or more layers of
middle managers
Delayering can:
Cut the costs of paying many managers
Improve communication
Empower the remaining workers if they are given
extra responsibilities
X Result in a loss of experienced, skilled managers
X Be costly initially in terms of redundancy and training
Matrix structures
Matrix structures use a project based approach to
organisational design
Project teams are made up of representatives from
the different functional areas
Matrix teams run alongside the traditional
functional structure
Matrix structures
Advantages of matrix Drawback of matrix
structures structures
•Staff from all departments can •Split loyalties as workers have
work on the project, leading to both project team leaders and
quick decision making their functional managers
•Workers may be able to better use •Administration of matrix
their skills and abilities management is expensive
Centralisation
Authority for decision making remains with senior
managers
Benefits of centralisation Drawbacks of centralisation
Firms can benefit from economies of Local differences may not be taken
scale into account
Ensures the activities throughout Employees cannot use their
the business fit with the knowledge of working at the
organisation’s objectives ‘coalface’
Quick decisions can be made by Workers may become demotivated
managers who are skilled at decision
making
Decentralisation
Authority for decision making is delegated down the
hierarchy
Benefits of decentralisation Drawbacks of decentralisation
Staff are empowered to make A consistent corporate message may
decisions which may be motivating not be delivered throughout the firm
Local conditions can be considered Fewer chances of benefiting from
when making decisions economies of scale
The experience of all workers is Workers down the hierarchy may be
utilised less skilled at ‘decision making’
Flexible workforces
Flexibility can be achieved using:
Core & peripheral Outsourcing Home working
workers
Core workers: •Business functions are •Employees work from
•Usually full time and provided by other home
permanent specialist organisations
•Know the firm well e.g. cleaning firms. •Usually relies on the
•Typically managers & use of advanced
specialists. •May be more cost technology and
effective than carrying communication
Peripheral workers: out these functions in-
•Bought in only when house. •Provides flexibility to
needed both workers and their
•Employed on a employers
temporary basis
Culture
Culture refers to the typical way of working
within an organisation as demonstrated by the
behaviours of the people that work for it
An organisation’s culture is influenced by the
structure of the organisation
Types of business culture
Culture Characteristics
Power culture •Power is held by a small number of people
•Swift decisions are made
Role culture •Highly structured and defined roles
•May be bureaucratic and lack creativity
Task culture •Based on team-working within groups set up for a
particular task
•Can respond quickly to changing environment
Person culture •Trained workers are given the freedom to share
knowledge and expertise
Entrepreneurial •Encourages risk taking and creativity
culture •Failure is often accepted and learned from
Teamwork
Importance of teamwork
Teamwork can:
Increase labour productivity
Encourage innovation
Improve employee commitment and motivation
Increase quality
Lower absenteeism and labour turnover
Formal and informal teams
Formal groups are developed to meet given
organisational objectives. Members have defined roles
and there will be a leader.
Informal groups are based on the relationships
between group members. They are concerned with
social and psychological needs rather than business
objectives. Informal groups may provide support for
formal groups.
Characteristics of effective teams
Effective teams are likely to display the following
characteristics:
Clear, shared goals
Defined roles
Open and honest communication
Mutual trust
Effective decision making
Balanced participation and leadership
Co-operation
Ways of managing conflict
Effectiveness of teams
The effectiveness of a team can depend upon:
The skills and abilities of the team members
The size of the group
The task to be undertaken
Belbin’s team roles
Belbin identified a number of roles of team members:
Plant – creative problem solver
Resource investigator – extrovert and enthusiastic
Co-ordinator – mature and good delegator
Shaper – dynamic and driven
Monitor-evaluator – strategic thinker
Team worker – co-operative and calming
Implementer – reliable and efficient
Completer – conscientious perfectionist
Specialist – provides knowledge and skills
