Chapter 7 : Organization and Management

(SBPG 89-104)

[DEF] Definition Section

• Organization Structure
o the formal internal framework of a business that shows how it is
managed and organized
• Functional Departments
o the main activities of a business
• Hierarchy
o the number of levels in an organizational structure
• Chain of command
o the route through which authority is passed down through an
organization
• Subordinate
o an employee who is below another employee in the organization’s
hierarchy
• Span of control
o the number of subordinates reporting to each supervisor/ manager
• Delayering
o Reducing the size of the hierarchy by removing one or more levels
• Centralized Organization
o one where all the important decision-making power is held at head office
or the center.
• Decentralized Organization
o one where the decision-making powers are passed down the organization
to lower levels.
• Directors
o appointed or elected members who have the responsibility for
determining and implementing the company’s policy
• Annual General Meeting (AGM)
o a meeting for shareholders that limited companies must hold once a year.
• Chief Executive Officer (CEO)
o the most senior manager of all responsible for overall performance of
company
• Manager
o an individual who is in charge of a certain group of tasks, or a certain area
or department of a business.
• Supervisor
o an individual who checks and controls the work of subordinates
• Delegation
o Passing authority down through the organizational hierarchy to a
subordinate
• Autocratic Leadership
o a leadership style where the leader makes all the decisions
• Democratic Leadership
o a leadership style where employees take part in the decision making
• Laissez-Faire Leadership
o a leadership style where most of the decisions are left to the employees
• Trade Unions
o an organization of employees aimed at improving pay and working
conditions and providing other services such as legal advice.
 ❖ Types of Organization Charts
▪ Regional
▪ Functional
▪ Product

Hierarchical Structures
The main features are:
- levels of hierarchy
- chain of command
- span of control

Levels of Hierarchy
This describes the different levels In an organizational structure.

Chain of command
As the business grows employs more and more employees

no effective control of all employees

So, the chain of command, describes the route which the authority is passed down
from the managers from top to bottom.
The person in the chain of command is directly responsible to the person above them
and below them.
Span of control
The number of subordinates reporting to each supervisor/ manager is called
span of control.
It can be described as ‘wide’ or ‘narrow’ depending on the number of subordinates a
person is responsible for.

The number of factors that affect the span of control including:

• The difficulty of tasks
o More complex tasks result in narrow span of control to be used.

• The experience and skills of the employees

o Span of control becomes wider if the subordinates are more skilled
and experienced.

• The size of the business

o Span of control of large businesses is often narrower than smaller
businesses.

• Levels of hierarchy
o Managers in tall organization structures will usually have narrower
spans of controls than managers in flat organization structures.

• Management style
o This can differ as the workforce is not the same between each
business
Wide Span of Control
Advantages
▪ Less expensive as fewer managers/ supervisors needed
▪ Less supervision improves employee motivation
▪ Faster communication and decision-making
Disadvantages
▪ Fewer managers/supervisors reduces promotion opportunities
▪ Less control over subordinates’ work
▪ Effective communication may be difficult

Narrow Span of Control

Advantages
▪ Effective communication is easier
▪ Better control over employees and their work
▪ More managers/ supervisors increase promotion opportunities

Disadvantages
▪ Communication and decision making are slower
▪ More expensive
▪ More supervision reduces motivation
Tall structure chart
-Tall organization structure has many levels of hierarchy with each level having a
layer of management except from bottom level.
-Several managers needed for the layers so the span of control is narrow.
-Chain of command is long.
-Communication and decision-making slower as they must pass through layers.
Flat structure chart
-Flat organization structure has few levels of hierarchy so the chain of command is
very short.
-Communication and decision-making are much quicker.
-Fewer managers in flat structure so span of control is wide.

❖ Delayering
Reducing levels in hierarchy to save costs.
Involves cutting out middle management.

Advantages
▪ Reduces costs
▪ Fast communication, more effective and quicker decision making
▪ Increases opportunity for delegation

Disadvantages
▪ Increased workload
▪ Bad quality of decision making
▪ Employees fear redundancy and reduces job security

Centralized Organization
One where decision-making power is held at the top by senior managers and then
passed down to the lower levels in the hierarchy through the chain of command
Advantages
▪ Quick decision-making
 ▪ Decisions are taken for the benefit of a business
▪ Greater use of specialist staff
Disadvantages
▪ Slower communication
▪ Unable to respond quickly
▪ May reduce motivation

Decentralized Organizations
One where the authority to make some decisions is delegated to the lower levels in
the hierarchy or in other cases to another categories and facilities.
Advantages
▪ Decisions are made based on local needs
▪ Can be used for training
▪ Improve employee motivation
Disadvantages
▪ Decision taken might not be in interests of whole business
▪ Poor decisions made

❖ Roles, Responsibilities and inter-relationships

Directors and the chief executive officer

Directors are the most senior level of management in any limited company. Their
responsibilities are:
▪ Setting a strategy – long term business plans
▪ Making sure resources are available for projects
▪ Reviewing performance of managers
▪ Protecting the interests of shareholders
▪ Providing leadership

Managers
The day-to-day running of a department is the responsibility of a manager. The main
responsibilities being:
 ▪ Making sure that the decisions of directors are carried out
▪ Delegating tasks to members of the department
▪ Taking decisions needed to achieve targets
▪ Motivating employees so they work hard to achieve daily objectives
▪ Solving day-to-day problems

Supervisors and other employees

Supervisors may be responsible for giving out the tasks to employees and making
sure they carry out tasks well with quality.
Their responsibilities being:
▪ To complete tasks efficiently and at the required quality
▪ Work towards achievements individually or with groups

❖ The role of management

Managers are responsible for:
✓ Setting objectives
✓ Motivating employees
✓ Making sure employees have completed their tasks

Functions of management
1. Planning
o It is all about looking where the business is now and where it wants to be in the
future. Once this has been decided the managers must set clear objectives to
decide on actions needed for targets to be achieved.

2. Organizing
o This function of management is about preparing the resources needed to
achieve the planned goals.

3. Commanding
o Involves the control and supervision of subordinates and aims to motivate
employees as well
 4. Coordinating
o To make sure all the different parts of the business are working together.

5. Controlling
o This final function of management involves checking to make sure plans are
working.
Managers also need to:
✓ Understand the people who work for them
✓ Set good examples
✓ Treat subordinates fairly
✓ Delegate tasks
✓ Communicate effectively

Delegation
It is giving the authority to the subordinates to make decisions and complete the
tasks. Successful delegation requires the employee to be given not only the authority
to complete the tasks but also resources as well.
Managers are sometimes keen to delegate tasks as they fear losing control of
decision-making and may even feel threatened by subordinates who can do better
than the manager.
Delegation can sometimes benefit both managers and subordinates.
• It allows managers to focus on more complex tasks
• Can motivate employees who are given the opportunity to take responsibility
and develop skills.
• Delegation is a way of developing skills of employees, making work flexible.
• Quality of work is often improved.

❖ Leadership Styles
Autocratic Leadership style
An autocratic leader will make all decisions without any discussion with others. They
decide the objectives and on how they will be achieved. Instructions are passed down
to the employees and the leader will make sure they have been carried out.
Autocratic leader is more interested in completion of task than in the welfare and
motivation of employee.
Suits for faster decision making and are suited to situations that require immediate
response.
Democratic Leadership style
The leader will discuss with employees before taking any decision. Improves the
quality of the final decision. Communications are also 2 way as the employees will
have an opportunity to start the discussion as well as providing feedback to
suggestions made by leaders.
More likely to delegate authority for some decision-making to the subordinates. This
leadership style is likely to motivate employees that they are trusted as they
complete tasks without supervision.
Suits for wide variety of business situations.

Laissez-Faire Leadership style

Allows employees to make own decisions and carry out tasks with very little or no
input from the leader. Leader will provide coordinating and supporting role for team
members.
Effective for employees involved in creative tasks.

Description of the above 3

Features of Main Leadership styles:

Autocratic Democratic Laissez-faire

Objectives Set by leader without Set by leader but Set by leader or
any input from employees are without any input
employees consulted from employees

Decision-Making Taken by leader Employees are Delegated to

encouraged to take employees who take
part but leader makes decisions
final decision

Communications One-way, no feedback Two-way, feedback Communication is

opportunity encouraged upwards, little
feedback from
manager

Supervision of Closely supervised by No close supervision No supervision

employees leader but leader on standby

Availability of Employees are given Employees are given Employees are

information very limited info information to allow provided with all
about business them to fully information needed to
participate take decisions

Motivation levels Likely Low Likely High Could be either high

or low

Choosing a leadership style

The skills and experience of the workforce
- the more skilled and experienced employees are, less important to supervise them
The time available to make decision.
- if decision needs to be taken quickly, no time to discuss between employees
The personality of manager
Task needed to be completed
- nature of a task may require different leadership styles.
 ❖ Trade Unions
• What is a trade union?
An organization formed and financed by employees for the purpose of
protecting the interests of its members and improving work conditions.
They help members by carrying out :
▪ Negotiating with employers to improve pay and working conditions – main role
of trade unions. This is known as collective bargaining.
▪ Resolving Conflicts – when disagreements rise between employees and
employers, trade unions will try to resolve the situation
▪ Providing legal support and advice – trade unions provide its members with
advice about their legal rights as an employee.
▪ Providing services for members – may provide range of benefits for members

Effects of employees being in trade unions

o More collective bargaining
o Legal advice is often too expensive for individuals
o Protect employee’s job by taking discussions with employers to reduce job
losses
o Must pay membership to join
o During strike action employees lose wages and cannot be recovered.

Effect on employers of trade unions

o Improves working conditions and health conditions to help improve employee
motivation and reduce labor turnovers.
o Powerful unions can sometimes force employers to meet high wage demands
and it is bad for business
o Unions could use industrial actions to meet their demands.