0264 · 2.2.1Simple organisational structures

Functional areas and responsibilities

0:00Kestrel Bikes produces bicycles. As orders increase, its owner needs employees to organise production, attract customers and manage money. Each employee also needs to know who gives instructions and who handles problems. By the end of this video, you will understand how a business divides responsibilities, organises reporting relationships and chooses working patterns. Organisational structure is the levels of management and the division of responsibilities within a business. A manager directs the work of employees and makes decisions within an area of responsibility.

0:28Clear responsibilities help employees direct questions to the appropriate person. Reporting relationships also show who checks progress and responds when difficulties arise. A functional area is a section of a business responsible for a particular type of activity. The main functional areas are operations, marketing, finance and human resources. These activities exist even when a small business has few employees. Its owner might handle several areas personally, while a larger organisation can employ specialists.

0:58Operations is the functional area responsible for producing goods or services. At Kestrel Bikes, this includes organising assembly and checking that bicycles are ready for customers. Employees need suitable materials and equipment to complete orders. In a hotel, operations would involve providing accommodation and preparing rooms because the business supplies a service. Marketing is the management process of identifying, anticipating and satisfying customer needs profitably. Research into customer preferences helps Kestrel Bikes decide which designs to offer.

1:28Suitable advertising can then bring those products to potential buyers’ attention. Understanding demand also helps the business avoid producing bicycles that customers have little interest in purchasing. Managing the business’s money is the job of the finance department. Finance employees record financial transactions, plan spending and check whether funds are available to pay bills. Before Kestrel Bikes buys equipment, finance considers whether the purchase is affordable. Paying suppliers and employees on time keeps materials arriving and production running.

1:56Finally, human resources manages all matters relating to employees. Recruitment and training help Kestrel Bikes obtain the skills required for its work. This area also deals with employment records and employee concerns. These responsibilities support other departments because production and customer service depend on having suitable employees available. The functional areas depend on each other. Marketing might identify demand for a new bicycle design, while operations checks whether existing equipment can produce it.

2:24Finance considers the money required, and human resources arranges any additional training. Coordination helps the business turn customer demand into a product it can actually supply.

Organisational charts and reporting lines

2:33An organisational chart is a diagram showing job positions and reporting relationships within a business. The boxes identify roles, while connecting lines show who reports directly to whom. At Kestrel Bikes, the managing director appears at the top. Operations, marketing and finance managers each report directly to that position. A level of hierarchy is a level of management with the same authority. The chart shows four levels overall, including the production employees at the bottom.

2:59The managing director occupies level one, and the departmental managers sit at level two. Supervisors form level three, while the production employees occupy level four. The chain of command is the structure that allows instructions to pass down from senior managers to lower levels. Follow the route from the managing director to the paint employee. Instructions pass through the operations manager and then the finishing supervisor. This route crosses all four levels, so it is a long chain of command.

3:25Subordinates are employees who report to someone in a higher position. Span of control is the number of subordinates working directly under a manager. To find the operations manager’s span of control, count the direct connections underneath that box. The assembly supervisor and finishing supervisor give a span of two. The managing director has a span of three because three departmental managers report directly to that position. Each supervisor oversees two production employees, which also gives each of them a span of two.

3:51Count direct reports separately from everyone further down the organisation. The operations manager remains responsible for the department, but the production employees report directly to their supervisors.

Tall and flat structures

4:01A tall structure has many levels of hierarchy, a long chain of command and usually narrow spans of control. At Kestrel Bikes, supervisors can closely monitor a small group. Employees gain support when learning difficult tasks, and the business can identify mistakes quickly. Additional management levels also give employees more steps for promotion. However, the business pays salaries for those additional management positions, so its management costs are higher. Instructions pass through several stages, so communication can take longer.

4:29A message about a customer’s requirements may lose detail as each person passes it onwards. Employees at the bottom may then receive incomplete instructions, which increases the risk of an unsuitable finished product. A flat structure has few levels of hierarchy, a short chain of command and usually wide spans of control. Suppose Kestrel Bikes removes its supervisor positions. The revised chart has three levels, and all four production employees report directly to the operations manager.

4:54That manager’s span of control therefore increases from two to four. Fewer stages allow instructions to reach employees faster, while fewer management positions reduce the business’s costs. Delegation is giving a subordinate the authority to carry out particular tasks; the manager remains responsible. A wider span often requires more delegation because the manager has more direct reports. Experienced employees can gain greater responsibility over their daily work. The disadvantage for the manager is a heavier workload from supervising more employees directly.

5:25Each person may receive less individual guidance because managerial time is limited. New employees could struggle with unfamiliar tasks and make avoidable mistakes. The business therefore needs to consider employee experience and task complexity when choosing an appropriate structure. Tall and flat describe the arrangement of levels within a business. The relevant evidence is the number of stages between senior management and employees. Span of control depends on direct reporting lines, while the chain of command follows a route through the structure.

5:52Keeping these features separate makes organisational charts much easier to interpret.

Home working and flexible hours

5:56Flexible working means arrangements that vary where or when employees carry out their jobs. Home working involves working from home using the internet. Flexible hours allow employees to choose their start and finish times within limits. Each arrangement suits some tasks better than others, so a business considers the work involved before offering either one. Home working benefits employees because they avoid travelling to the workplace and gain time for personal responsibilities.

6:20The business can save office costs if it needs less workspace. However, managers may find coordination harder when employees work separately. A delayed response to a colleague can hold up an order or slow a decision. For employees, working alone can reduce social contact and make support less immediately available. A suitable workspace and reliable internet are also necessary for many tasks. At Kestrel Bikes, a finance employee could process records remotely.

6:46Bicycle assembly requires workshop equipment, so that activity takes place on the business’s premises. With flexible hours, employees can fit work around commitments such as collecting children from school. Suitable schedules help employees remain in their jobs, so the business spends less on recruiting replacements. However, managers must arrange sufficient coverage throughout opening hours. If several employees choose similar finishing times, customers could face longer waits. Employees may also find that their preferred hours clash with colleagues’ availability.

7:15Meetings and shared tasks still require agreed times, so flexibility operates within practical limits.

Part-time and full-time employment

7:21Flexible hours can involve completing the usual working week with different start and finish times. The important choice concerns timing, while the required hours remain agreed. Part-time employees work fewer hours than the normal working week, while full-time employees work the whole normal working week for that business. The usual number of hours depends on the employer and job. Both arrangements can use flexible hours where the business permits them, so weekly hours and scheduling are separate decisions.

7:46Part-time employment gives the business flexibility to cover busy periods. A cinema can recruit employees for weekend evenings, when additional service is needed. Total wages per employee are lower when fewer hours are paid at the same hourly rate. Employees benefit from having more time available for study, caring responsibilities or other commitments. For the business, coordinating several short schedules can make communication harder because colleagues have fewer overlapping hours.

8:14Employees with limited workplace contact may also feel less involved, which can reduce commitment. Part-time employees receive less weekly pay when fewer hours are paid at the same rate. Their reduced attendance may also limit opportunities to practise tasks. Full-time employment helps the business maintain continuity because employees are available throughout the normal working week. Regular contact makes it easier to share updates and develop familiarity with daily procedures. Full-time employees earn a higher weekly wage, which gives them more financial security.

8:41Frequent practice can also strengthen their skills and confidence. The business must pay for those agreed hours even when demand becomes quiet. Full-time schedules therefore provide less flexibility when additional employees are needed only for short peaks. Employees have less time for personal commitments outside work. The best arrangement depends on when demand occurs and how much continuity each job requires.

Justifying employment decisions

9:03Cedar Café serves meals and has six employees. It has a limited wage budget, busy lunchtimes and quiet afternoons. Its aim is faster lunchtime service, and it needs additional employees to achieve this. An exam-style question could ask you to justify employing part-time or full-time employees in this situation. Justify means support a case with evidence or argument. Begin with a clear choice, then connect your reasons to the information about the business.

9:28A useful comparison explains why the strongest alternative is weaker in these circumstances. Each sentence should add a separate reason or explain its effect on the café’s aim. I recommend that Cedar Café recruits part-time employees for its busy lunchtimes. Extra employees at that peak would serve meals faster, so customers wait less. The café’s limited wage budget then pays only for those lunchtime hours. Full-time employees would also be paid through the quiet afternoons, when little extra work exists, so they would use more of the budget.

9:55Part-time employment therefore gives faster lunchtime service while keeping the café within its wage budget. In Paper One Short Answer and Data Response, you could interpret a chart or explain an employment advantage using business information. Paper Two Case Study can require choices supported by the circumstances described. Explain means set out purposes or reasons, say why and how, supported with relevant evidence. Link each structural feature or working arrangement to a clear business consequence.

10:21Organisational structure is the levels of management and the division of responsibilities within a business. Operations, marketing, finance and human resources divide the main activities into manageable areas. Their work must fit together so the business can meet customer needs. Charts then show how responsibility connects through reporting relationships. The chain of command is the structure that allows instructions to pass down from senior managers to lower levels. For reading direct relationships, remember that span of control is the number of subordinates working directly under a manager.

10:52Tall structures provide closer supervision through additional levels, while flat structures shorten communication routes but increase demands on managers. Flexible working means arrangements that vary where or when employees carry out their jobs. Part-time employees work fewer hours than the normal working week, while full-time employees work the whole normal working week for that business. Choose arrangements by connecting customer demand, employee needs, supervision and the business’s costs.