When hiring large numbers of staff, organisation is important. Everyone within the company needs to understand their role.

Structuring a business

Managers need to organise their staff and keep them motivated

As a business grows in size and takes on more staff, managers need to make sure employees understand their role within the company.Organisation is the way a business is structured.

One method of organisation is to set up departments covering the four main areas of business activity:

• finance
• human resources
• marketing
• operations

Organisation charts are diagrams that show the internal structure of the business. They make it easy to identify the specific roles and responsibilities of staff. They also show how different roles relate to one another and the structure of departments within the whole company.

An organisational chart showing the structure of a company

For example, the Marketing Manager in the Midlands can see at a glance that she is in charge of ten subordinates, and that her line manager is the Director of Marketing.

Types of organisation

The staff structures of a tall organisation and a flat organisation

Tall organisations have many levels of hierarchy. The span of control is narrow and there are opportunities for promotion. Lines of communication are long, making the firm unresponsive to change.

Flat organisations have few levels of hierarchy. Lines of communication are short , making the firm responsive to change. A wide span of control means that tasks must be delegated and managers can feel overstretched .

In centralised organisations, the majority of decisions are taken by senior managers and then passed down the organisational hierarchy.

Decentralised organisations delegate authority down the chain of command, thus reducing the speed of decision making.

One method of reducing costs is to remove a layer of management in a hierarchy while expecting staff to produce the same level of output. This is called delayering.

Important Technical terms we need to learn

• Hierarchy refers to the management levels within an organisation.
• Line managers are responsible for overseeing the work of other staff.
• Subordinates report to other staff higher up the hierarchy. Subordinates are accountable to their line manager for their actions.
• Authority refers to the power managers have to direct subordinates and make decisions.
• Delegation is when managers entrust tasks or decisions to subordinates.
• Empowerment sees managers passing authority to make decisions down to subordinates. Empowerment can be motivational.
• The span of control measures the number of subordinates reporting directly to a manager.
• The chain of command is the path of authority along which instructions are passed, from the CEO downwards.
• Lines of communication are the routes messages travel along.
• Delayering is to reduce the size of business hierarchy