STRUCTURE OF A BUSINESS

ORGANISATIONAL SET UP

The organisational set up of a business involves the allocation of responsibilities and functions to different components of an organisation and delegating authority to each position in order to ensure the smooth operation of the business so as to achieve the planned objectives. With an organisational structure in place, each person’s responsibilities and authority are defined as they pertain to the functions necessary to accomplish the group’s goal. It shows the functional relationship that exists among the employees and the various departments within an organisation.

In other words, an organisational structure must show the flow of responsibilities, authority and channels of communication. It can also be defined as arrangement and interrelationship of the various component parts and positions of a business.

 

PRINCIPLES OF MANAGEMENT

1. Clarity of Objective: The aims and objectives of an organisation, the strategies and means of achieving them must be clearly stated. This will make the employees strive towards achieving the planned objectives.
2. Span of Control: This is the number of subordinates under the direct supervision of a manager to ensure efficiency and effectiveness; the number of subordinates should be restricted to what is mentally possible for him to control. It should be kept as low as three to six.
3. Unity of Command: This principle states that subordinates should receive instructions from their boss only as dual command affect effectiveness.
4. Division of Labour: The organisation will achieve efficiency if work is divided into the smallest possible units as specialisation increases productivity.
5. Authority and Responsibility: Authority and responsibility should be properly stated and both should match each other, i.e ., authority should be commensurate with responsibility for effective supervision.
6. Unity of Direction: People engaged in the same kind of activities must have objectives in a single plan. This means that the corporate interest must supersede individual interest.
7. Scalar Chain: Henry Fayol said, “a hierarchy is necessary for unity of direction.” Formal communication must move up and down the line of authority, i.e., vertical communication whereby there would be proper communication from the top to the bottom and from the bottom to the top.
8. Discipline: In any organisation, discipline must be maintained in all departments. A fair disciplinary system, with penalties judiciously applied by worthy superiors, will definitely strengthen the organisation.
9. Espirit de Corps: Management should foster the morale of its employees and build up a team spirit. Management should be guided by the popular slogan: “United we stand, divided we fall.”
10. Remuneration: The remuneration of employees should be fair and satisfactory to both the employer and the employee.
11. Evaluation Principle: This principle helps to determine or measure the contributions of every worker to the attainment of the organisational objectives.

 

ORGANISATIONAL CHART

Organisational chart is a diagrammatic representation of the relationship between the various organs of the organisation, i.e ., the structure of the organisation. It shows the line of authority and responsibility. In other words, it is a diagram of an organisation’s structure, showing the departments, functions and positions in the organisation and how they are related.

 

Uses of Organisational Chart

1. Organisational chart shows the flow of line of authority and responsibilities.
2. It shows the various positions in an organisation.
3. The span of control will be shown within an organisation.
4. The whole structure of the organisation will be shown.
5. A chart shows the relationship between various organs in an organisation.
6. The boundaries of each position holder will be shown.

 

TYPES OF ORGANISATIONAL STRUCTURE

The various types of organisational structure in practice are:

• Line organisation.
• Functional organisation.
• Line and staff organisation.
• Committee.

 

• Line Organisation

Line organisation refers to the direct working relationship between the subordinates and the superiors in which the line of authority and responsibilities flow from the top executives to the lowest subordinates. A line manager has unlimited authority over a subordinate to whom he gives orders. This type of structure allows authority to flow downwards and responsibility upward. This means authority is greatest at the top and diminishes at each successive lower level of management. This type of organisation is more suitable for small or medium-sized enterprises.

 

Advantages of Line Organisation

1. It is simple and is easily understood by the employees and management.
2. It is good for small organisations where specialisation is not very important.
3. Decision-making at all levels is made easy and simple.
4. There is clear cut identification of duties, responsibilities and division of labour.
5. Discipline is always maintained.
6. It is based on the principles of unity of command and scalar chain.

Disadvantages of Line Organisation

1. Lack of specialisation at the supervisory level.
2. It is autocratic.
3. There may be much pressure and demand on the top managers.
4. A manager may be responsible for too many things.

 

• Functional organisation

Functional organisation is a set up where certain functional relationships exist between specialist or functional managers and line managers, e.g. the personnel manager has a functional responsibility for all activities concerning personnel in all the departments of the organisation, even though each employee has his own manager in their department.

 

Advantages of Functional Organisation

1. Experts are allowed to make use of their expertise for the betterment of the company.
2. There are several supervisors and this makes for better co-ordination.
3. It encourages division of labour and therefore promotes efficiency.
4. The system is flexible and conducive for growth and expansion.

 

Disadvantages of Functional Organisation

1. Authority can overlap.
2. There is lack of fixed line of responsibility.
3. Confusion can occur because there are too many experts and bosses.
4. There may be lack of effective control.
5. It is not easy to apportion blames for mistake.

 

• Line and Staff Organisation

The line and staff organisation is a combination of line or direct executives and the specialist’s auxiliary services (functional) whereby a line organisation engages experts who are to advise the line managers in the performance of their duties. Line executives do the actual work required in the operation of the organisation, whereas staff are specialists who advise executives.

 

Advantages of Line and Staff Organisation

1. There is efficiency through specialisation.
2. Decision-making can be enriched because ideas can be shared.
3. Technical experts are in a better position to advise the line managers on complex problems.

 

 

Disadvantages of Line and Staff Organisation

1. Staff manager may attempt to usurp line authority.
2. There is the possibility that staff experts may intentionally undermine the authority of line managers.
3. Staff managers have no line of authority and no responsibility for what actually happened.
4. Their ideas may be unrealistic and unpracticable.
5. Friction may also occur when staff managers report to an higher authority in the scalar chain of command.

 

• Committee

In the committee type of organisation, the management team is assisted by a number of standing advisory committee. This is common in many business enterprises. The advisory committee members are appointed to carry out special duties. A committee, for instance, may be set up to make recommendations or to execute projects.

 

Advantages of Committee

1. It helps in getting opinion from many individuals.
2. They make recommendations to the officers of the organisation.
3. They are set up to carry out special duties.
4. People react favourably to a group decision than one man.
5. It gives room for creating new ideas and better quality decisions.
6. They are democratic in nature.
7. It enhances the likelihood of participation.

 

Disadvantages of Committee

1. It leads to delay of routine work.
2. Decisions made are usually weak or inefficient.
3. Accountability can be lacking since there is no individual responsibility for decision made.
4. Sometimes a committee may be too large for constructive action.

 

AUTHORITY, POWER, ACCOUNTABILITY AND RESPONSIBILITY IN AN ORGANISATION

Authority: Authority can be defined as power which has legitimacy. It is the right to give command or directive and to ensure compliance. The authority of a manager is derived from his office and no manager can command or direct unless he has the authority to do so.

Authority can also be referred to as the instrument of office or anything that enables individuals to secure obedience from other persons.

 

Power: Power can be defined as the ability to exert influence and to compel obedience. To have power is the ability to change the behaviour or attitudes of other individuals through having the means of sanctioning them. The power of an officer is derived from the authority given to him.

 

Accountability: Accountability simply means a situation whereby a subordinate is accountable to his superior in an organisation for his actions and he is obliged to report to his superior how well he has discharged his responsibilities and use the authority delegated to him. The extent to which somebody is accountable will depend solely on the amount of authority delegated to him.

 

Responsibility: Responsibility can be defined as the individual obligations to carry out the duties assigned to him or her. It is the liability of a person to be called upon to account for the action and results from assigned duty. Responsibility cannot be delegated.

Henry Fayol says, “authority should be commensurable with responsibility.” According to him, responsibility is feared among the people, whereas authority is sought after. A good leader should encourage those around him to accept responsibility.

 

SPAN OF CONTROL

The span of control or span of management refers to the number of subordinates a manager can effectively control or number of subordinates working with him. To ensure effective control, the number of subordinates under a manager’s control should be restricted to what is mentally possible for him to handle. As suggested by Henry Fayol, span of control should be limited to between three and six.

 

Factors Determining Span of Control

1. The Nature of Work: The nature of work will determine the span of control. Complex jobs require more supervision and less number of subordinates, but routine jobs require less supervision but large number of subordinates.
2. The Qualification, Training and Experience of the Manager: A well trained and experienced manager will be able to manage effectively and efficiently large number of subordinates while an inexperienced manager can not do so.
3. The Personality of the Manager: The style of leadership of the manager as well as the freedom to make decision will affect the span of control.
4. The Size of the Organisation: The larger the organisation, the larger the number of subordinates to be supervised. In a small organisation, the span of control will be small.
5. The Quality of Lateral Communication: The quality of lateral communication which may enable the subordinates to get job done without constant reference to the superior for consultations.
6. Level of Technological Development: The level of technological development will determine the number of subordinates that will be put under direct supervision of a manager.
7. The Calibre of Subordinates: The calibre of subordinates in terms of experience, exposure, skill and educational background can also determine the span of control. The higher the education and experience, the lower the number of subordinates.
8. The Demands on a Manager’s Time in other Jobs: The amount of time which a manager spends on non-managerial tasks will determine the number of subordinates he can effectively co-ordinate.
9. Frequency of Interpersonal Relationship between a Manager and the Subor-dinates: The frequency of interaction between a manager and the subordinates will determine how effective the span of management will be within an organisation.

 

DELEGATION OF AUTHORITY

Delegation of authority is the transfer of responsibility to a subordinate, with sufficient authority to enable the subordinate carry out the assignment while the superior will consider himself accountable for the delegated job. The larger the organisation, the greater must be the extent to which delegation of authority is practised.

 

Principles of Delegation

1. There must be balance of authority, responsibility, and accountability in an organisation.
2. Responsibility cannot be delegated.
3. There must be clarity in the functions given to each department.
4. The principle of scalar chain of command must be clearly specified.

 

Advantages of Delegation of Authority

1. Reduction of Burden of Work: The superior can reduce the burden of work which would otherwise be done by him through delegation.
2. Training of Subordinates: One of the ways of training subordinates is through delegation of authority. They can develop themselves through the job delegated to them.
3. It Saves Time: When some responsibilities are delegated to subordinates, it will afford the managers enough time for high level duties.
4. Speedy Execution of Job: By engaging subordinates in decision-making, jobs can be handled much more speedily.
5. It Makes Smooth Succession Possible: The subordinates will be able to prepare adequately for taking over from their superiors when they are transferred or retired.
6. Ensures Cordial Relationship: Delegation of authority can bring cordial relationship between the subordinates and the superior.
7. It Motivates Subordinates: Delegation of authority allows the subordinates to use their initiatives and by so doing contribute their quota to organisational efficiency and productivity.

 

Disadvantages of Delegation of Authority

1. May Lead to Confusion: Delegation can lead to confusion if authority and responsibility is not properly defined or stated.
2. Unfinished Task: Insufficient delegation may lead to unfinished tasks.
3. It leads to Duplication: Delegation often leads to duplication of management effort at lower levels of the hierarchy.
4. Delegation can be Abused: Subordinates may abuse the opportunity given to them by not taking appropriate action as at when due.
5. Delegation May Affect the Quality of Job: When authority is delegated to less experienced subordinates, the quality of work may be reduced.

 

WHY A MANAGER MAY REFUSE TO DELEGATE AUTHORITY

1. Fear of expressing favouritism among the subordinates.
2. Fear of repercussion and personal judgement being called to question.
3. The fear of the subordinate performing better than the boss.
4. The fear of losing touch with the department, work and staff.
5. The fear of the subordinate making costly mistakes.
6. The fear of the subordinates detecting their faults.
7. The fear of the subordinates becoming more knowledgeable than the boss.
8. Sometimes due to lack of capable subordinates.
9. The fear of subordinates taking over their jobs.

 

What a Manager cannot Delegate

1. Setting policy objectives.
2. Motivating and communicating.
3. Checking and analysing result.
4. Setting training objectives.
5. Disciplinary and human relations matters.

 

INTERDEPARTMENTAL AND INTRA-DEPARTMENTAL COMMUNICATION

Communication is the process which involves transmitting meaningful messages between senders and receivers. It promotes rapid transfer of information from one place to another. Communication process is thus the foundation for management functions. It can be interdepartmental or intra-departmental communication.

 

(a) Interdepartmental Communication: Interdepartmental communication is the process of sending and receiving messages or information from one department to another within an organisation. It refers to communication among the various departments in an organisation.

The various media of communication in an establishment include: Telephone, Radiophone, Loud speakers, Circulars and Computer terminals.

 

(b) Intra-departmental Communication: This involves the sending and receiving of information within the departments of an organisation. In a department, there are various units and sections which must be co-ordinated through effective communication system.

The various media of communication available for intra-departmental communication are: Intercom, circulars, direct communication, bells, buzzers and notice boards.

 

Importance of Communication to a Business

1. It establishes and disseminates the goals of an enterprise.
2. It facilitates official transactions between the various units, sections and departments.
3. It helps to organise human and other resources in the most effective and efficient way.
4. It helps to select, develop and appraise members of the organisation.
5. It leads, directs, motivates and creates a climate in which people want to contribute to the growth of the enterprise.
6. It provides permanent records for reference purposes.
7. Communication makes it possible for the day- to- day activities to be speedily attended to.
8. It bridges the gap between the top management and the subordinates.
9. It helps to develop plans for the achievement of the goals and objectives of the enterprise.