IB Business & Management

Unit 2.2 Organizational StructureLesson 1: The Formal Organization

Pages 203-208

IB Business & Management

1. Think about it…President Roosevelt

once said, “The best executive is the one who has sense enough to pick good men to do what he wants done, and self-restraint enough to keep from meddling with them while they do it.”

Explain what he meant by this?

…

Theodore Roosevelt (1858-1919), 26th president of the USA

1. What are the job roles of each section in an organization?

2. What is an organizational chart? 3. How are they organized?…

2. Focus Questions:

We will be looking at the many ways businesses organize their human resources.We have learned in Unit 1.1 that one of the

four major business functions was what?HUMAN RESOURCES!

We also learned in Unit 1.2 about sole proprietorships and the various jobs they have to do, because why?They are the ONLY one running the business.

…

3a. An overview:

So, what if the business expands and becomes larger?

What will the business need then?It will need a formal and organized structure to

make sure the business operates in an efficient and functional manner.

This can be determined by two things:1. Accountability….what do I mean by this?

Shows who is responsible for what job and their performance.

2. Responsibility…what do I mean by this?Shows who is in charge of whom.

3b. An overview:

In pairs:Brainstorm and create a “typical” structure for

OUR IB High School.Hints:

Think about who is at the top and work your way down.

You have 5 mins....

4. Activity:

As stated before, as a business becomes larger and more complex it has to be more structured. If not, there would be total chaos and all the tasks and

roles will not be fulfilled.An organizational structure is helpful in many ways:

Can determine specialist areas.Determines who is the supervisor; form of accountability.Determines who has authority and their responsibilities.Explains how all areas in the business are linked.Can verify your own position in the company. Identifies the channels of communication in an

organization.…

5a. Formal Organization: Job Roles

CEOBoard of

Directors

Management

Supervisor and Team leaders

Other employees

Chief Executive Officer:• Responsible for running the business.• Accountable to the shareholders.• Head of the company.• Leads the team of directors.• Represents the BOD.• Works on the company’s objectives and policies with the BOD.• Communicates with the directors about any problems.• Plans and implements corporate strategy. •…

Board of Directors

Management


Other employees

Board of Directors (executives):• responsible for the overall running of the company.• Two main types of directors:• 1. Executive (full time)• 2. Non-executive (part

time)• Their duties:• Target setting• Long term planning• Making organizational

policies and codes of practice

• Monitoring and controlling the organization

• Oversees staffing issues• Advising and supporting

the managing directors • …

Board of Directors

Management


Other employees

Management:• Responsible for a team of people.• Decision makers for the day to day implementation of company policy.• Assist and are accountable to the BOD.•…

Board of Directors

Management


Other employees

Supervisor & Team leaders:• They are the junior managers.• Involved in making operational decisions.• They have direct contact with the workforce.•…

Board of Directors

Management


Other employees

Other Employees:• They form the majority of the company’s workforce.• Will have great levels of skill and responsibilities.• Work to achieve targets set by team leaders.• Work as a member of a department.• Make routine decisions concerning their job role.• Provide support to other people in the company •…

What is an organizational chart? It is a diagram which represents a firm’s formal organizational

structure (see Fig. 2.2c, pg. 207).Charts show four important features of a business:

1. The different functional departments within a business. What are the departments in Fig. 2.2c?

2. The chain of command, various positions of authority. Explain the chain of command in Fig. 2.2c.

3. The span of control, measures the number of staff that are accountable to a manager. Discuss who is responsible to whom in Fig. 2.2c.

4. The channels of communication, the route that messages are communicated. Describe the channels of communication in Fig. 2.2c.

...

6a. Organizational Charts

So…in Fig. 2.2c, how many levels of hierarchy are there? FIVE…right! Explain who is at each level.

Traditionally organizations are structured according to their functions, but other possibilities exist. Organization by product:

If broad range of product, which caters to various types of customers…remember the SBU’s in Unit 1.7.

Organization by process: Based on the different processes carried out in the business. Think of a

publishing firm; editorial, print, and sales and marketing departments. Organization by geography:

Remember the MNC’s in Unit 1.9? They can be organized based on region or area. This will allow the company to be more responsive to local cultural differences and consumer needs.

Turn to page 208 and look at Fig. 2.2d, multiforms of organizational structure.

…

6a. Organizational Charts

Unit 2.2 Organizational StructureLesson 2: Delegation and Span of Control

Pages 208-212


Explain what is meant by delegation and is this beneficial and/or effective to the company?

What is span of control and when does it occur?

Are there any advantages to having this span of control?

…

1. Focus Questions

What is it and why is it important? It is when managers pass on to others some of their roles

and responsibilities. It is the passing on of control and authority.

It is important because the manager is entrusting and empowering their staff to complete a task or project.Their staff will be held accountable for their actions.The responsibility will remain with the manager. So try to understand the difference between the two.

Excellent test question: Describe with examples, the differences between accountability and responsibility within a company’s organization.

…

2a. Delegation

How many here want to be managers? What do you think would be one very important skill for

managers to master?That’s right, the art of delegation.

Think about it…if you are a manager and you try to do every little thing that pops up on a daily basis, will you be a successful manager? Will to be a productive manager?

Effective delegation has tremendous benefits:As a manager you save time and can focus more on

strategic issues.It can also motivate and develop staff trust and talents.…

2b. Delegation

Now the opposite is true for poor delegation. If you are always stepping in the way and taking credit

for others work, it will lead to confusion and distrust.This will hurt your productivity and can de-motivate staff.

So, how can ensure that you are properly delegating?REMEMBER Unit 1.3….SMART?

For delegation to be effective it must be: Specific Measurable Agreed Realistic Time-based Ethical Recorded

2c. Delegation

Key word here is control.The number of people who are controlled by a

manager.They are directly accountable to a manager.The manager is accountable to the BOD and the

CEO.

So, the higher up in the organization’s hierarchy the wider the span of control tends to be.

Some examples of span of control.…

3a. Span of Control

3b. Wide Span of ControlCEO

Assistant

Worker

Worker

Worker

Worker

Worker

Worker

Worker

• This occurs when a manager has many people under their control.• What is the advantage of this?

• There are fewer layers in the hierarchy of the organization.• Cost will be kept under control.• The flatter the organizational structure the better

communication will be between the different levels of hierarchy.• …

• A Narrow Span of Control occurs when there are fewer subordinates who are accountable to a manager.• What is the advantage of this?

• Easier to communicate with and control the team.• Smaller teams may be more productive.

• However, with more levels of management in the structure, this system can be costly.

CEO

Director

Manager

Worker

Worker

Manager

Director

Manager

Worker Worker

Manager

Wide Span of Control (flatter structure)

Narrow Span of Control (taller structure)

Delegation is an important part of managing

Faster team communication

Improved communication Small teams are easier to control and manage

Cheaper to operate Greater specialization and division of labour

Smaller psychological gaps between those at the top and those at the bottom

Greater opportunity to earn a promotion

3d. Advantages Wider and Narrower

3d. Advantages Wider and Narrower

Wide Span of Control (flatter

structure)•Delegation is an important part of managing.•Improved communication.•Cheaper to operate.•Smaller psychological gaps between those at the top and those at the bottom.

Narrow Span of Control (taller

structure)•Faster team communication.•Small teams are easier to control and manage.•Greater specialization and division of labour.•Greater opportunity to earn a promotion.•…

Many of you are probably asking by now, what is the ideal span of control? The questions comes from a management theorist, Henri

Fayol (1841-1922).But it was V.A. Graicunas (1898-1947) from Lithuania who

addressed this question of the optimal span of control.He suggests that the maximum number of subordinates

should be four or five. Why?Could cause delay and confusion if managing too

many people. In any case, more and more businesses are opting for a wider

span of control. But what will determine how much control should be granted to

a manager?

4a. The Ideal Span of Control?

The degree of control

granted to a manager will

depend upon…

Experience,

competence, and

traits of the

manager

Nature of manageme

nt style

Skills and dynamics

of subordinat

es

The nature of work

The type of production

system used

Unit 2.2 Organizational StructureLesson 3: Levels of Hierarchy & Chain of Command

Pages 212-214, 225-227.


What are the different levels in a hierarchy?Explain delayering? Explain downsizing? How

are they different?Explain the differences between a flat and tall

organization.Explain the chain of command.What are the benefits of an organizational

chart?The best structure for an organization

depends on what factors?

1. Focus Questions

Refers to the structure of an organization.It is based on a ranking system.

Will be ranked according to who is at the top, middle, and bottom. Who is at the top?Who is at the bottom?

These levels of an organization are best viewed in a chart.Each level in the hierarchy refers to the different rank

and its associated degree of authority and responsibility.Think of military ranking system, with the general at the top

and the private at the bottom.…

2a. Levels of Hierarchy

Level 5: employees

Level 4: Line Managers

Level 3: Directors / Managers

Level 2: BOD / Directors

Level 1: CEO CEO

• Two main advantages of using hierarchical systems:• 1. Show clear lines of communications.• 2. Establish departments or teams.

• They also have their limitations:• Departmentalization can lead to workers being isolated.• These structures tend to be inflexible.• …

2c. Flat vs. Tall Organizations

Narrow span of control leads to tall hierarchical structures.

Wide span of control leads to flatter

hierarchical structures.

What is delayering and why are many organizations opting to do it? It is a process of removing one or more levels in the hierarchy.By doing this the company flattens out their organizational

structure.Thus reducing the number of layers of management and widen the

span of control.Three main reasons for delayering:

1. reduce costs2. increase speed of communicationEncourage delegation

Delayering is often associated with downsizing. Do you remember what is meant by downsizing?…

3a. Delayering

There are several drawbacks to this:1. They create anxiety and a sense of insecurity

among workers.2. Can overstretch employees and increase

their workload.3. Flexible working practices will require

workers to upgrade their skills regularly.4. Decision-making may take longer since

mangers are dealing with larger teams.…

3b. Delayering and Downsizing

Refers to the formal line of authority through which orders are passed down in an organization.

A flat hierarchical structure will have a short chain of command.…

4. Chain of Command

HR is essential to running a businessEffectively organizing people is challenging

for any managerPoor organizational structure can lead to:

Reduced staff motivationDuplication of effortCommunication problemsDifficulties in coordinationIneffective decision making

Organizational Structure & Business Strategy

Organizational charts are important because they allow employees to see:Overall structure of human resources in a

businessWho their line manger is (who they are

accountable to)Those who must report to their line managerFormal chain of command


It is likely that larger organizations require longer chains of command and taller hierarchical structures

Importance of delayering:Cuts costsRemoves unnecessary management rolesShorter chain of commandDelegation of decision making is pushed downProductivity improves


There is not one model to fit every businessThe best structure for an organization

depends on:Size of the businessEmployee competenciesManagement attitudesHistory and culture of the business


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