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Organisational Structure of a Business
Specification Detail
Organisational structure: the importance of divisional structure, levels of hierarchy, chains of command and centralised v decentralised systems
Why Do Businesses Need to be Organised?
As a business gets bigger it needs to be organised
The structure determines: Who is responsible for what job and Who is responsible to whom
Organisational structure
There are 3 main types of organisational structure:Tall or HierarchyFlatMatrix
Forms of Organisational Structure
Workers
Supervisors
Managers
Directors
Managing Director
Board Of Directors
Hierarchy/Tall structure
Workers
Managers
Owners
Forms of Organisational Structure
Flat structure
BODMD
R & D Transport
Production
SalesManaging
Finance
SupportServices
HRM
R E S P O N S I B I L I T Y & A U T H O R I T YR E S P O N S I B I L I T Y & A U T H O R I T Y R E
S P
O N
S I B
I L I T Y
& A
U T
H O
R I T
Y
R E S P O N S I B I L I T Y & A U T H O R I T YR E
S P
O N
S I B
I L
I T
Y &
A
U T
H O
R I T
Y
Forms of Organisational Structure
Matrix structure
Organisational chart
A _________ which shows the _________ structure of an ______________
Diagram Internal Organisation
ProductionDirector
H. ResourcesDirector
FinanceDirector
Marketing Director
Logistics Director
Staff Staff Staff Staff Staff Staff Staff Staff Staff Staff
Managing Director
ProductionManager
H. ResourcesManager
Finance Manager
Marketing Manager
LogisticsManager
Board of Directors
Forms of Organisational Structure
Tall/Hierarchy structure
Staff Staff Staff Staff Staff Staff Staff Staff Staff Staff
ProductionManager
H. ResourcesManager
Finance Manager
Marketing Manager
LogisticsManager
Owners
Forms of Organisational Structure
Flat structure
Chain of Command
Line on which orders and decisions are passed down From top of hierarchy to bottom
ManagingDirector
ProductionDirector
ProductionManager
FactorySupervisor
MachineOperators
• The longer the chain the more complex communication is. Messages get lost
• Operators/workers may not feel involved in decisions
• May be hard for company to change as more groups to resist changes
No defined line of authority
No defined chain of command
Encourages teamwork
Communication very fastMatrixStructure
Reduced line of authority
Needs all levels to function
Short chain of command
Communication fasterFlatStructure
Long chain of command
Communication is slow
Lines of communication clear
Large organisations, usually secure
D i s a d v a n t a g e sA d v a n t a g e s
Hierarchal Structure
Advantages & Disadvantages
Summary Questions
Key questions:
1. What are the 3 main types of organisational structure?
2. What is an organisational chart?
3. What is the chain of command?
4. Why do businesses have different types of structures?
Centralised and Decentralised systems
TASK: Put the following statements into a chart describing advantages and disadvantages of decentralisation and centralisation
Advantage Disadvantage
Advantage Disadvantage
Centralisation
decentralisation
Centralised Organisations
Advantages Tight control of
decisions Decisions
made by senior management
Decisions are consistent
Disadvantages Lack of
motivation for managers
Central management may be “out of touch”
Slow to make decisions
De-Centralised Organisations
Advantages Increased
motivation of managers
Encourages local initiatives
Decisions based on more up-to-date information
Decisions made quicker
Disadvantages Managers may lack
experience Local decisions may
be inconsistent with the overall business aims and objectives
Duplication of functions and costs