Hi and welcome back to another Business Stu. Lecture. In the last session we discussed about types of business forms. Now, we will see in detail the organisation of individual businesses. Even the smallest of businesses has an ‘Organisational Structure’. This means the levels of management and division of responsibilities within an organisation.
Most businesses that start out as sole traders. start hiring workers at an early stage. This creates, an employee-employer relationship, The presence of an employee, lowers the workload and encourages the employer to delegate. Delegation is the handing down of a duty to an employee, however the final responsibility lies with the employee. This has various advantages both for the employee as well as the employer. We will first discuss the advantages of delegation for the employer, the first obvious advantage is the reduction in the workload of the employer as more tasks will fall on the shoulders of the employee. Another important benefit is that the increased concentration of the manager on the business matters will make the business growth rapid. For the employee, delegation makes work more interesting and also motivates the employee by making him feel like he is worth the job.
Back to Organisational structure, let us talk about organizational charts, these are diagrams that show the hierarchies( chain of command) and levels( span of control) within an organisation.
The structure within an organisation which allows instructions to be passed from the top to bottom levels is a Chain Of Command. And the structure that contains a group of people working directly under a manager is known as the Span of Control. These charts have various advantages, such as the the fact that they show the workers, the positions they have with relation to other workers and help determine the right type of attitude, respect and interaction between workers. This chart also brings a sense of belonging which motivates the workers as they feel part of the organisation they work for.
The chains of command and spans of contol are in a way inversely related, the smaller the chain of command the wider the span of control and vice versa.
Now we shall move on to Managers. In a large organisation there are usually two types of managers: Line managers and staff managers. Line managers are those who have direct control over staff e.g a marketing manager who has the sales manager, promotion manager, as well as the regional manager under him, this shows that he can directly influence the activity of those under him. The staff managers , on the other hand support the functional departments e.g finance dept. using their skills e.g the IT manager supports the other departments through Tech support.
Last but not the least we will study the concept of centralized management and decentralized management. Centralized management structure is one where the decisions come from the central management i.e if Coca Cola has its headquarters in USA and a decision needs to be made regarding a change in production at a Coca-Cola plant in Pakistan, the decision shall be made by the Coca-Cola headquarters rather than by the regional manager in Pakistan. This type of management is usually discourage by firms as this involves little delegation and power of decision making to the employees, leaving them feeling less empowered.
Decentralised management is quite the opposite, almost every decision is made by the concerned outlet/franchise. This beneficial because only the manager of the particular outlet is actually familiar with the problem at hand and is better able to deal with it.
Moreover, there are different types of decentralization.
- Functional decentralization
- Federal decentralization
- Regional decentralization
- Decentralization by project teams
Functional decentralization: This is when functional departments e.g the finance dept. HR dept. and production dept. are granted autonomy on decision making.
Federal decentralization: When different production lines are granted autonomy e.g in a vehicle manufacturing company if the bus line and car line are free to make their own decisions.
Regional Decentralization: When outlets/offices of a multinational are granted power to make their own decisions regarding their own regions.
Decentralisation by project teams: When a team undertaking a project is made free to make its own decisions.
Q:1 What is an organizational structure?
Ans. An organizational structure is a structure that shows the levels of management and the division of responsibilities within a business.
Q:2 Why is an organizational chart important for a large business?
Ans. An organizational chart shows the chains of command and the spans of control within a business.
Without an organizational chart the workers within an organization would not be able to see the positions of themselves and the other workers, this would cause confusion among employees as they would not know who they are supposed to obey and to whom are they supposed to give orders. In the absence of an organizational chart, the firm will not remain organized as the employees would not be sure of their assignments and fail to do them altogether creating hurdles for the business.
Ineffective communication can also result from the lack of an organizational structure which would hinder all internal communication and interaction. This could seriously undermine the performance of a business.
Hence, an organizational chart proves invaluable to any organization.
That’s it for this time guys, hope you enjoyed the session, see you another time. Ciao.