Organisational Structure

Further aspects of organisational structure

• Ownership and management of larger organisations are often separated.

Main reason: Managers do not have sufficient funds so they rely on banks and markets(the owner)to provide the investment.
Scalar chain

• Definition: Line of authority which can be traced up or down the chain of command thus relates to the number of management levels within an organisation.

Span of control

• number of people whom the manager is directly responsible.
• Tall structure-many managerial levels(hierarchies) and narrow span of control.
• Flat structure-few managerial levels and a wide span of control.

Factors that influences the span of control(SOC):-

• nature of the work : more repetitive the work,more wider the SOC.
• type of personnel : the better the manager and the personnel are,the wider the SOC.
• location of personnel: the more widely spread the personnel the narrower the SOC.

Centralisation and decentralisation

Centralisation
-upper levels of an organisation's hierarchy retain the authority to make decisions.
Decentralisation
-authority to make decision is passed down to units and people at lower levels.

Factors:-

• management style
• ability of management/employees
• location spread
• size of the organisation/scale of activities.
  

Advantage:-

• senior management free to concentrate on strategy.
• better local decisions due to local expertise.
• better motivation due to increased training and career path.
• quicker responses/flexibility due to smaller chain of command.

Disadvantages:-

• Loss of control by senior management.
• Dysfunctional decisions due to a lack of goal congruence.
• Poor decisions made by inexperienced managers.
• Training costs.
• Duplication of roles within the organisation.
• Extras cost in obtaining information.

Informal Organisation
-Arise due to common interets or friendships.

Advantages:-

• better motivation
• better communication

Disadvantages:-

• inefficient organisations
• opposition to change can be intensified
• the 'grapevine effect'

Impact on business
Managers need to:-

• adapt the formal structure to complement the informal one.
• maintain a looser formal structure.
• take account of the informal structure in decision making.