Organizational Structure

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

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Business that are ◦ Centralized ◦ Decentralized

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Different forms of decentralization

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It refers to the ◦ Levels of management ◦ Division of responsibilities

…… within an organization

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Shown on an Organizational Chart

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Main Tasks

Working Conditions

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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

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Hierarchy

Chief Executive (Bill Murray)

Marketing Director

Departments

Store Manager

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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

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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

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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

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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

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Conflict & frustration between the two groups 

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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

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Decentralized ◦ Many decisions delegated to lower levels of management

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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

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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

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Understand the importance of delegation Analyze the difference between a centralized and decentralized Organization

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Explain the different forms of decentralization