Business at work

to customer.

• Administration – adding the customers details to the IT system, passing on details to other departments within the business.

• Finance – investigating the financial status of the customer, offering credit terms if appropriate, invoicing for payment.

• Distribution – receiving details of order and meeting the customer’s demands, liasing with marketing over delivery dates, rescheduling other production as required.

• Human resources – at a store or warehouse level – ensuring sufficient employees are available to meet the delivery requirements of the order, arranging overtime payments if necessary.

Hence these functions help meet the objectives successfully. All Tesco’s organisation structure works as links of a chain, if one link falls down, all the organisation will experience difficulty. For example, most important department of Tesco, I consider, is Distribution department. If this department fails, products will not be delivered to the store, so customers will go to another store. Tesco’s success is built on the good work of each department.

E4

Organisational structure

In many small firms, the owner may have a very hands-on approach and may be responsible for getting customers, hiring any extra labour and acquiring other inputs and taking all financial decisions. As organisations grow, however, their structure takes on a greater significance and those at the top have to pay more attention to its formal structure and presentation. The various business functions will show an increasing degree of specialisation as an organisation expands and people will be employed to manage and take decisions in specialist areas.

In general, an organisational structure sets out:

• Major roles and job titles, showing who is in control of the business as a whole and who manages its major business functions within departments.

• The level of seniority of people holding different positions and their respective positions in the organisation’s overall hierarchy.

• The working relationships between individuals, identifying relationships in terms of superiors and their subordinates and indicating who has authority to take certain kinds of decisions and who are responsible for carrying out the work arising from those decisions.

• The extent to which decision making is concentrated in the hands of people at or near the top of the organisation or handed down to those at lower levels of management.

• The broad channels through which information is communicated throughout the organisation, indicating the route by which instructions flow down the hierarchy and how information flows back up the hierarchy.

Organisational charts

Organisational charts are representations of the job titles and the formal patterns of authority and responsibility in an organisation.

Business may produce organisational charts for several reasons. First, it is important that a company reviews its organisational structure on a regular basis to take account of any changes in the business environment. A formal organisational chart helps the company to identify where changes need to be made and to decide the relationship between any new sections or departments and the rest of the organisation. Business also produce organisational charts because they allow a company to review its structure and to identify areas where cost saving changes and improvements can be made. Organisational charts are useful when changes take place in the company. It can be updated to take account of any informal developments in its structure that have been good for the company. A revised organisational chart is particularly useful for informing people about the new structure of the company after mergers or take-overs.

The organisational chart can also be used during an induction period to give new employees a useful overview of the company and their own position within the structure in terms of their authority and the managers to whom they are responsible. Although an organisational chart has several uses, it should not be taken as giving an exact description of how the organisation actually operates. It does not give the exact nature of job responsibilities or indicate what levels of cooperation may be necessary between departments.

Function 1.7: Line authority in a production department.

Chain of command - is the line of command flowing down from the top to the bottom of an organisation. It passes down the management hierarchy, from director and senior management levels to those in middle and junior management positions and eventually to employees in supervisory jobs who, for example may have authority over assembly line workers or staff providing services to the organisation’s customers. Organisations with a long chain of command - with a hierarchy made up of many levels of management - are said to have tall organisational structures.

Span of control - refers to the number of subordinates a manager is responsible for and has authority over. Organisations with a long chain of command will tend to have narrow spans of control. Organisations with a short chain of command tend to have wider spans of control. This produces a flat organisational structure because it has a hierarchy with fewer levels of management.

Flat organisational structures: are generally desirable, there is a limit to the number of subordinates who can be placed under one superior. Even very experienced managers who have the qualities and personalities that promote loyalty and hard work can only be responsible for so many employees.

Tall organisational structure : some organisations have many levels and grades of staff with a tree-like management structure and strong patterns of vertical communication. This means that there are many different grades of staff between people lower down the organisation and the person at the top. Tall organisations suffer from problems with bureaucracy, as information needs to be directed through the correct channels before appropriate action is taken.

The main features of such a structure are as follows:

• At each level there are several staff responsible to a person at the next level up. The process is repeated until the top of the organisation is reached.

• In a limited company the person at the top is the Managing Director who is ultimately responsible for the whole organisation.

• As the levels within the organisation are ascended, the number of people at each level decreases and this gives the organisation a pyramidal structure.

In an organisation with flat structure there are fewer levels or grades of staff and much more emphasis on communication across the organisation. This is more likely to be the structure of a small business where everyone knows each other and works together more as a team.

In some situations, however, a relatively wide span of control may be acceptable if:

• The potential disadvantages of a wide span are outweighed by the costs of employing the extra managers needed to produce narrower spans of control.

• Junior employees are engaged mainly in routine work and as a result the manager is required to make relatively few decisions.

• Managers are willing to reduce the pressure on their own time by delegating more decision making and they can identify staff who are likely to respond well to the extra responsibility.

• An effective range of financial and non-financial motivational factors produces a committed group of people who need very little supervision.

• The group within the span are highly skilled or talented and are given a great deal of scope to be creative and imaginative in their work.

Line structure

In a line structure, a company is usually organised into functional departments, each headed by a senior manager, below whom there is a chain of command. This indicates that there is a line of authority and responsibility as one goes down the structure.

Each person in the line has authority over those below, while being responsible for making sure that the work handed down to them from their immediate manager is completed. This applies even if the subordinate does not personally undertake the actual work.

Advantages:

• It is hierarchical structure which is simple to understand