Standard Grade Administration Core Notes Unit 1

Standard Grade Administration Core Notes Unit 1 Function and Organisation of a Business UNIT 1 - Functions and Organisation of Departments 1 INTRODUCTION In this unit you will find out about the following things:                     WHAT A DEPARTMENT IS BENEFITS OF DEPARTMENTS FUNCTIONAL DEPARTMENTS SUPPORT DEPARTMENTS ROLE OF PURCHASING DEPARTMENT AND PURCHASING STAFF REQUISITION FORMS ORDER FORMS ROLE OF SALES DEPARTMENT AND SALES STAFF INVOICES ROLE OF FINANCE DEPARTMENT AND FINANCE STAFF CREDIT NOTES STATEMENTS ROLE OF HRM DEPARTMENT AND HRM STAFF STAFF TRAINING BENEFITS FROM STAFF TRAINING JOB AND PERSON SPECIFICATIONS EMPLOYEE RECORD CARDS ROLE OF COMPUTER SERVICES DEPARTMENT AND ITS STAFF ROLE OF ADMIN SUPPORT DEPARTMENT AND ITS STAFF WHAT AFFECTS THE NUMBER OF DEPARTMENTS IN A BUSINESS UNIT 1 - Functions and Organisation of Departments 2 WHAT IS A DEPARTMENT? A DEPARTMENT is a group of people who all work together on RELATED tasks as part of a team. WHY DO BUSINESSES USE DEPARTMENTS? Businesses organise their workers into department teams, because working in a team should bring the following benefits.     STAFF CAN USE THEIR KNOWLEDGE TO HELP EACH OTHER STAFF CAN USE THEIR SKILLS TO HELP EACH OTHER STAFF CAN DEVELOP A GOOD TEAM SPIRIT THAT MAKES THEM WORK WELL THE BUSINESS WILL BE MORE ORGANISED THAN IF STAFF SIMPLY CAME IN AND DID WHATEVER THEY FELT HAD TO BE DONE UNIT 1 - Functions and Organisation of Departments 3 WHAT ARE THE MAIN DEPARTMENTS IN MOST BUSINESSES? As you have seen from looking at Organisation Charts, most businesses will have one department for each FUNCTIONAL area. A functional area is a specific type of work that is crucial to the success of the business. The main FUNCTIONAL AREAS and their DEPARTMENTS in a business are:     PURCHASES DEPARTMENT SALES DEPARTMENT FINANCE DEPARTMENT HUMAN RESOURCE MANAGEMENT DEPARTMENT Some businesses also have SUPPORT DEPARTMENTS. A support department helps the work of the functional areas. The main SUPPORT DEPARTMENTS in a business are:   COMPUTING SERVICES DEPARTMENT ADMIN SUPPORT DEPARTMENT Board of Directors Managing Director Sales and Marketing Director Sales Manager Marketing Manager Finance Director Accountant Purchasing Director Personnel Director Training Manager Purchasing Manager Recruitment Manager UNIT 1 - Functions and Organisation of Departments 4 THE PURCHASING DEPARTMENT What does the Purchasing Department do? The main job of the Purchasing Department is to buy the necessary STOCKS (items for resale) and EQUIPMENT (items needed for the work of the business) as cheaply as possible. This work involves the following steps.        Gathering information about what the business needs. Gathering catalogues and price lists from possible suppliers. Deciding who is the best supplier based usually on cost. Agreeing purchase prices and credit terms with suppliers. Placing orders with the best suppliers. Keeping records of orders that are placed. Making sure that orders that are placed arrive and are correct. UNIT 1 - Functions and Organisation of Departments 5 Who works in the Purchasing Department, and what do they do? A Purchasing Department can have several different members of staff who will each have different responsibilities. Examples of the different members of staff that you might find in Purchasing can be seen below in order of authority. 1 PURCHASING MANAGER The Purchasing Manager will be responsible for the following Purchasing Dept work.     Managing the staff and work of the Purchasing Department. Keeping up-to-date with new purchasing procedures. Arranging staff training with the help of the HRM Dept. Dealing with staff discipline with HRM Dept help. 2 BUYER (or PURCHASING OFFICER) The Buyer will be responsible for the following Purchasing Dept work.      Finding out what is needed from the REQUISITIONS. Getting QUOTATIONS (prices) from suppliers. Deciding on the best supplier and placing ORDERS. Checking that orders placed are actually received. Authorising payments for orders received. 3 PURCHASING ASSISTANT The Purchasing Assistant will be responsible for the following Purchasing Dept work.    Copying routine documents (eg ORDER FORMS, etc). Filing Purchasing Department documents. Keying in routine Purchasing Department documents. UNIT 1 - Functions and Organisation of Departments 6 Which documents do Purchasing staff have to know about to do their jobs? The staff in the Purchasing Dept have to be familiar with the following documents so they can COLLECT, PROCESS and TRANSMIT all of the information they need to do their jobs. 1 REQUISITION FORM A Requisition Form is a document that is filled out and sent to the Buyers in the Purchasing Dept to let them know that something the business needs has to be ordered. A sample requisition form and the information it contains can be seen below. First Class Enterprises Requisition Form Requisition No Name 001 ........................... W Smith................ .. Date Dept 1 August ............................. Finance .............................. Ref No A123 X456 Description Black Pens A4 Paper Quantity 50 7 Authorised Dept T L Jones ............... Finance ................... UNIT 1 - Functions and Organisation of Departments 7 2 ORDER FORM After the Buyers know what is needed (from the Requisition Forms) and they have found a suitable supplier, they will complete an Order Form. An Order Form is a document that tells the chosen supplier the following information:     the details of which items that the business wants; how much the items wanted will cost; when the items ordered should be delivered; when payment should be made to get any discount (TERMS). When an Order Form is complete it is sent to the Sales Department of the supplier that the business has decided to use. An example of an Order Form and the information it contains can be seen below. ORDER FORM First Class Enterprises, Shuttle St, GLASGOW, G64 Inkspot Stationers .............................. Glasgow Road ................................. GLASGOW G55 5RT Order No 004009 ....................... Date 3 August ..................... Cat No A123 X456 Description Black Pens A4 Paper Quantity 50 7 Unit Cost £0.05 £2.50 Total Cost £2.50 £17.50 NET COST Plus VAT @ 17.5% TOTAL COST Terms: 5% - 30 Days £20.00 £3.50 £23.50 UNIT 1 - Functions and Organisation of Departments 8 THE SALES AND MARKETING DEPARTMENT What does the Sales and Marketing Department do? The main job of the Sales and Marketing Department is make sure that people know about the products that the business is selling, and to deal with all of the orders which are received for these products. This work involves the following steps.       Sending out QUOTATIONS, PRICE LISTS and CATALOGUES. Processing orders. Dealing with customer enquiries and complaints. Carrying out market research. Advertising the business‟s goods or services. Preparing publicity materials and organising exhibitions. UNIT 1 - Functions and Organisation of Departments 9 Who works in the Sales and Marketing Dept, and what do they do? A Sales and Marketing Department can have several different members of staff who will each have different responsibilities. Examples of the different members of staff that you might find in Sales and Marketing can be seen below in order of authority. 1 SALES AND MARKETING MANAGER The Sales and Marketing Manager will be responsible for the following.     Managing the Sales and Marketing Dept‟s work and its staff. Keeping up-to-date with Sales and Marketing procedures. Arranging staff training with the help of the HRM Dept. Dealing with staff discipline with HRM Dept help. 2 SALESPERSON The Salespeople will be responsible for the following types of work.    Sending out PRICE LISTS and CATALOGUES. Sending out QUOTES (prices) to potential customers. Dealing with ORDERS received. 3 SALES AND MARKETING ASSISTANT The Sales and Marketing Assistant will be responsible for the following work.    Copying routine documents (eg INVOICES, etc). Filing Sales and Marketing Department documents. Keying in routine Sales and Marketing Dept documents. UNIT 1 - Functions and Organisation of Departments 10 Which documents do the Sales staff have to know about to do their jobs? The Salespeople need to know about the use of INVOICES. An invoice is basically a receipt for something that has been ordered, and is completed to record the following information:     the details of which items have been ordered; how much the items wanted will cost; when the items ordered should be delivered; how payment for the ordered items is to be made (TERMS). When an Invoice is complete it is sent with the ordered goods that it records to the Purchasing Department of the relevant customer. An example of an Invoice and the information it contains can be seen below. INVOICE Inkspot Stationers, Glasgow Road, GLASGOW, G55 5RT .............................. First Class Enterprises Shuttle St ................................. GLASGOW G64 Invoice No 00123 .......................... Date 6 August ..................... Cat No A123 X456 Description Black Pens A4 Paper Quantity 50 7 Unit Cost £0.05 £2.50 Total Cost £2.50 £17.50 NET COST Plus VAT @ 17.5% TOTAL COST Terms: 5% - 30 Days : UNIT 1 - Functions and Organisation of Departments £20.00 £3.50 £23.50 11 THE FINANCE DEPARTMENT What does the Finance Department do? The main job of the Finance Department is to look after and report on the money and financial performance of the business. So, we can see that this work involves the following activities.        Checking invoices and STATEMENTS (summary of all transactions) from suppliers. Preparing CHEQUES (instruction to pay) to be sent to suppliers. Preparing invoices, CREDIT NOTES (refunds) and statements for customers. Paying into the bank any cash and cheques received from customers. Calculating employee wages (PAYROLL) and paying employee wages. Paying any of the business‟ bills. Preparing final accounts – Trading, Profit and Loss Accounts, and Balance Sheet. Who can work in the Finance Department? 1 2 3 4 5 FINANCE MANAGER (manages staff, oversees work). ACCOUNTANTS (prepare accounts to show performance). WAGES SUPERVISOR (prepares PAYROLL). PAYMENT SUPERVISOR (records payments received and makes payments). FINANCE ASSISTANT (files and copies finance documents). UNIT 1 - Functions and Organisation of Departments 12 Which documents do the Finance staff have to know about to do their jobs? The staff in the Finance Department needs to know about the use of INVOICES and ORDERS to help the work of the Sales and Purchases Departments. They also need to know about CREDIT NOTES and STATEMENTS (which can be seen below). 1 CREDIT NOTE A Credit Note is a document that records any refunds given for things bought on credit. When a Credit Note is complete it is sent to the Purchases Department of the customer who is getting the refund. A sample credit note is shown below. CREDIT NOTE Inkspot Stationers, Glasgow Road, GLASGOW, G55 5RT .............................. First Class Enterprises ................................. Shuttle St GLASGOW G64 Cat No X456 Description A4 Paper (damaged) Invoice No 00123 .......................... Date 10 August .................... Quantity 4 Unit Cost £2.50 Total Cost £10.00 NET COST Plus VAT @ 17.5% TOTAL COST £10.00 £1.75 £11.75 UNIT 1 - Functions and Organisation of Departments 13 2 STATEMENT A Statement is a document that shows:    what has been bought; any refunds or payments; the amount still to be paid. When a Statement is complete it is sent to the customer who has been buying on credit. An example of a statement can be seen below. STATEMENT OF ACCOUNT Inkspot Stationers, Glasgow Road, GLASGOW, G55 5RT ................................. First Class Enterprises Shuttle St GLASGOW G64 Date 6 August 10 August Invoice 00123 Credit Note 00123 Details Date 31 August .................... £ £23.50 (£11.75) BALANCE OUTSTANDING Terms: 5% - 30 Days £11.75 UNIT 1 - Functions and Organisation of Departments 14 THE HUMAN RESOURCE MANAGEMENT (HRM) DEPARTMENT What does the HRM Department do? The main role of the HRM Department is to recruit staff, monitor staff performance and conditions, and look after staff welfare. So, we can see that this work involves the following activities. RECRUITMENT       Prepare JOB DESCRIPTIONS and PERSON SPECIFICATIONS. Advertise jobs as they become available. Collect application forms or CVs from people applying for jobs. Prepare a short list of applicants to interview. Interview applicants for jobs and choose new employees. Give feedback to candidates on their interviews. MANAGING STAFF      Prepare CONTRACTS OF EMPLOYMENT for new employees. Keep records of employee details, holidays and sickness. Keep records of any accidents. Deal with disciplinary procedures. Arrange training courses for departments/business. LEGISLATION   Make sure that the business follows all relevant employment laws. Make sure that the business looks after the health and safety of its staff. Why is the work of the HRM department very important? UNIT 1 - Functions and Organisation of Departments 15 The work of the HRM Department is very important to the success of the business. This is because if the HRM Department chooses the best staff and trains them well then the staff and the business will experience the following benefits.       Staff will not make many mistakes and so save the business money. Staff will produce quality work that gives a better impression. Staff will produce their work on time and so info is available when needed. Staff will look after equipment to reduce repairs and down time. Staff will gain satisfaction from their skills and be happier at work. Staff may be able to gain promotions or new jobs due to their new skills. How can the HRM department make sure that it does its’ work well? The HRM Department can try to make sure that it does its work well by making sure that its‟ staff are well trained in the following areas.     How to carry out recruitment. How to organise and carry out training. Health and safety issues related to the business. People management. To make sure that any staff training (and HRM staff training in these areas) is effective, the following should be considered when training is being arranged.        The current skill levels of staff. Level of training required, eg basic or advanced. Suitability of “on-the-job” training, ie training while at work. Suitability of “off-the-job” training ie training away from work – eg College Equipment available for training. Cost of training. The availability of trainers. UNIT 1 - Functions and Organisation of Departments 16 Who can work in the HRM Department? 1 2 3 4 HRM MANAGER (helps to recruit new staff, manages HRM staff). TRAINING OFFICER (organises and records staff training). HEALTH AND SAFETY OFFICER (checks all safety laws are followed) HRM ASSISTANTS (file and copy HRM documents) Which documents do the HRM staff have to know about to do their jobs? The staff in the HRM Department have to be familiar with the following documents so they can COLLECT, PROCESS and TRANSMIT the info that they need to do their jobs. 1 JOB DESCRIPTION This describes all of the details of a job vacancy, eg hours, salary, role, etc 2 PERSON SPECIFICATION This describes what the ideal person for a job vacancy should be like, eg experience, qualifications, personality, etc 3 CONTRACT OF EMPLOYMENT This document sets out the specific details and conditions of an employee‟s job. This must be provided by law as it forms the basis of any future discussions about the job. 4 EMPLOYEE RECORD CARD This is used to keep an up-to-date record of an employee‟s PERSONAL (eg address, etc) and PROFESSIONAL (eg qualifications, etc) information. UNIT 1 - Functions and Organisation of Departments 17 THE COMPUTER SERVICES DEPARTMENT What does the Computer Services Department do? The main job of the Computer Services Department is to maintain and upgrade the IT hardware and software of ALL other departments to help their work. So, we can see that this work involves the following activities.       Installing new software. Making sure that licences are stored safely and are up-to-date. Maintaining and repairing computer equipment. Responding to problems or queries. Dealing with staff training in ICT. Maintaining ICT security. Who may work in the Computer Services Department? 1 2 3 4 COMPUTER SERVICES MANAGER HELP DESK OPERATORS PROGRAMMERS (to create and install software) TECHNICIANS (responsible for setting up and looking after hardware) UNIT 1 - Functions and Organisation of Departments 18 THE ADMINISTRATION SUPPORT DEPARTMENT What does the Administration Support Department do? The main job of the Administration Support Department is to help with the administration tasks of ALL other departments to aid their work. So, we can see that this work involves the following.      Word processing work Dealing with mail Copying work Reception Duties Filing Who may work in the Administration Support Department? 1 2 3 4 5 ADMINISTRATION MANAGER RECEPTIONIST REPROGRAPHICS STAFF MAIL ROOM STAFF COMPUTER OPERATORS UNIT 1 - Functions and Organisation of Departments 19 WHAT AFFECTS THE SIZE AND NUMBER OF DEPARTMENTS IN A BUSINESS? The size and number and of functional departments in a business will depend mainly on the NUMBER OF STAFF in the business. For example – SMALL businesses will tend to need only 4 FUNCTIONAL DEPARTMENTS. This is due to the IT and Admin support required being small and so members of the functional departments can provide these services for themselves. However, as a business GROWS larger, it will tend to INCREASE the SIZE of its‟ FUNCTIONAL DEPARTMENTS and also include ADMIN and IT SERVICE DEPARTMENTS. This is due to the many workers required to keep up with the demand of the business and the IT and Admin support required to keep the business functioning properly. UNIT 1 - Functions and Organisation of Departments 20 Part B INTRODUCTION In this unit you will find out about the following things:                 THE ROLE OF ADMINISTRATION IN A BUSINESS THE IMPORTANCE OF ADMINISTRATION IN A BUSINESS ORGANISATION CHARTS USERS OF ORGANISATION CHARTS LINE RELATIONSHIPS © LATERAL RELATIONSHIPS © AUTHORITY RESPONSIBILITY LINES OF COMMUNICATION CHAINS OF COMMAND SPANS OF CONTROL TALL BUSINESSES FLAT BUSINESSES CHANGES TO STRUCTURE EFFECTS OF CHANGES TO STRUCTURE © REASONS FOR CHANGES IN STRUCTURE © © - Credit Level Material UNIT 1 - Functions and Organisation of Departments 21 WHAT IS THE ROLE OF ADMINISTRATION IN A BUSINESS? ADMINISTRATION is all about COLLECTING, PROCESSING and TRANSMITTING information in a business. Administration should do this EFFICIENTLY (easily) and EFFECTIVELY (properly). COLLECT (gather information) PROCESS (do something useful with the information) TRANSMIT (pass the information on to people who need it) UNIT 1 - Functions and Organisation of Departments 22 WHY IS GOOD ADMINISTRATION IMPORTANT IN A BUSINESS? Administration is important to a business because it makes sure that the business will SURVIVE, GROW and make PROFITS. Administration does this by making sure that everyone in the business has all of the information that they need to:    BE SURE THAT THEY KNOW WHAT THEY SHOULD BE DOING; BE ABLE TO THEIR JOB PROPERLY; BE ABLE TO COMMUNICATE WELL WITH EACH OTHER. UNIT 1 - Functions and Organisation of Departments 23 ORGANISATION CHARTS An example of administrative information that helps communication and organises workers is an ORGANISATION CHART. An Organisation Chart is a DIAGRAM that is used to show the OVERALL STRUCTURE of a business. An example of an Organisation Chart for a limited company is shown below. Board of Directors Managing Director Sales and Marketing Director Sales Manager Marketing Manager Finance Director Accountant Purchasing Director Personnel Director Training Manager Purchasing Manager Recruitment Manager  An organisation chart is like a „family-tree‟ for a business. UNIT 1 - Functions and Organisation of Departments 24 WHO USES AN ORGANISATION CHART? The people who are likely to find Organisation Charts useful can be seen below: User VISITORS Uses  To see the overall size of the organisation  Shows who to contact about any questions/problems.  To know who to contact directly. NEW MEMBERS OF STAFF  Shows their place in whole business.  Shows who to report to.  Shows who they are in charge of.  To see positions they could be promoted to it they work hard RECEPTIONIST  For security. Photos on the chart will make staff recognisable  Lets them know about promotions/new staff/leavers  Allows them to direct visitors/phone calls. The Organisation Chart is USEFUL to these people because it shows them information VISUALLY (as a picture) and so is easy to understand. The only main DRAWBACK of using an Organisation Chart is that information can soon be out of date and so useless (eg employees leave the business or new employees join). UNIT 1 - Functions and Organisation of Departments 25 WHAT INFORMATION ABOUT STRUCTURE DOES AN ORGANISATION CHART SHOW? An Organisation Chart shows the following information about business structure. 1 EMPLOYEE NAMES, JOB TITLES, ROOM NUMBERS, INTERNAL TELEPHONE NUMBERS and PHOTOGRAPH OF EMPLOYEES 2 LINE RELATIONSHIPS A line relationship describes the link between a MANAGER and the STAFF below them. Line relationships are shown by VERTICAL lines joining staff together. An example can be seen below. Managing Director Line Relationship Finance Manager 3 LATERAL RELATIONSHIPS A lateral relationship describes the link between staff of EQUAL importance that report to the same manager. Lateral relationships are shown by staff being at the same level HORIZONTALLY and linked to the one manager. An example can be seen below. Managing Director Lateral Relationship Sales Manager Finance Manager HRM Manager UNIT 1 - Functions and Organisation of Departments 26 4 LEVELS OF AUTHORITY Organisation charts show the level of AUTHORITY each employee has. Authority is the power an employee has to instruct others and to make decisions. Levels of authority are shown VERTICALLY on an Organisation Chart. The employees who have the MOST authority are at the TOP of the chart. The amount of authority FALLS with each LOWER level of the chart. An example of different levels of authority is shown below. High Level of Authority Senior management Middle management Lower level employees Low 5 LEVELS OF RESPONSIBILITY Organisation charts show the level of RESPONSIBILITY each employee has. RESPONSIBILITY shows what an employee has to be answerable for when they are doing their job, ie their duties and tasks. Levels of responsibility are shown VERTICALLY on an Organisation Chart. The employees who have the MOST responsibility are at the TOP of the chart. The amount responsibility FALLS with each LOWER level of the chart. An example of different levels of responsibility is shown below. High Level of Responsibility Senior management Middle management Lower level employees Low UNIT 1 - Functions and Organisation of Departments 27 6 CHAIN OF COMMAND The Chain of Command shows the connection between who gives instructions and who receives them, ie connections between authority levels. On an Organisation Chart, the Chain of Command is shown by the LINE relationships for the business. Chains of Command can be LONG (many levels of workers involved) or SHORT (few levels of workers involved). The main features of these chains can be seen below. LONG Chain   Lots of levels of workers Commands can take a long time to move  Commands can be distorted as they move  Chance of people not knowing what to do  Takes time for staff to know what to do      SHORT Chain Few levels of workers Commands move quickly Commands are unlikely to be distorted Less chance of people no having commands Staff know what to do quickly UNIT 1 - Functions and Organisation of Departments 28 7 LINES OF COMMUNICATION Information has to flow up and down through the business so that staff can do their job properly. The ways that information flows around a business are known as LINES OF COMMUNICATION. On an Organisation Chart, the lines of communication are shown by ALL of the LINE and LATERAL relationships in the business. Lines of Communication can be LONG (many levels of workers involved) or SHORT (few levels of workers involved). The main features of these lines can be seen below. LONG Line   Lots of levels of workers Information can take a long time to move  Information can be distorted as it moves  Chance of people being missed out     SHORT Line Few levels of workers Information moves quickly Information is unlikely to be distorted Less chance of people being missed out UNIT 1 - Functions and Organisation of Departments 29 8 SPAN OF CONTROL The Span of Control for a member of staff shows how many people they are in charge of. These are shown on an Organisation Chart by the LATERAL relationships in the business. Spans of control can be WIDE (one manager supervises many staff) or NARROW (one manager supervises few staff). The main features of these spans can be seen below. WIDE Span    Few managers Many staff for each manager Little manager time for each staff member  Stress for manager due to staff numbers  DELEGATION (authority) for staff  Staff level decision making       NARROW Span Many managers Few staff for each manager Lots of manager time for each staff member Stress for staff due manager supervision No DELEGATION (authority) for staff No staff level decision making Careful thought must be given to which Span of Control a business will use for its managers. This is because the wrong span can lead to poor staff morale and little quality work being done. The main things to be considered when making this important decision are:     MANAGER‟S ABILITY AND SKILLS (eg poor skills means narrow span); MANAGER‟S IDEAS ON CONTROL (eg tight control means narrow span); QUALITY OF STAFF (eg high quality staff can allow wide spans); IMPORTANCE OF WORK DONE BY MANAGER AND STAFF. UNIT 1 - Functions and Organisation of Departments 30 WHAT IS THE USUAL SHAPE OF AN ORGANISATION CHART? Organisation Charts are usually shaped like a PYRAMID. This is because there are normally few managers at the top of a business and many workers at the bottom. This structure is also known as a HIERARCHICAL structure due to the “hierarchy” (levels) of managers. An example is shown below. Managing Director Sales and Marketing Manger Purchasing Manager Sales Supervisor Marketing Supervisor Buyer Buyer Assistant Assistant Assistant Assistant Assistant Assistant Assistant Assistant However, although all Organisation Charts have an overall pyramid shape, the exact shape of the pyramid can vary. This is to show 2 different types of management structure – FLAT and TALL. Few levels of management Many levels of management FLAT BUSINESS TALL BUSINESS UNIT 1 - Functions and Organisation of Departments 31 WHAT ARE THE MAIN FEATURES OF TALL AND FLAT BUSINESSES? FLAT (eg doctors, dentists, small shop) FEATURES     ADVANTAGES    Few levels of management Few lines of communication Wide spans of control Variety in jobs Fewer managers saves money Fewer staff speeds communication Quick communication speeds decisions  Fewer managers means DELEGATION  DISADVANTAGE S    Delegation can motivate staff Wide spans can mean less control Few chances for promotion Varied jobs can increase staff stress             TALL (eg army, police, large business) Many levels of management Many lines of communication Narrow spans of control Specialised jobs Narrow spans can mean better control Narrow spans can improve team spirit Lots of chances for promotion Specific jobs mean less stress for staff Many managers costs money Many staff slows communication Slow communication means slow decisions Many managers means no DELEGATION  No delegation can demotivate staff UNIT 1 - Functions and Organisation of Departments 32 WHAT WILL DETERMINE WHETHER A BUSINESS IS TALL OR FLAT? Whether the structure of business will be FLAT or TALL will normally depend on the following. Factor Details BUSINESS SIZE LARGE businesses tend to be TALL due to the many levels of managers required to organise the large number of workers. SMALL businesses tend to be FLAT due to the few managers required to organise the small number of workers. NATURE OF THE BUSINESS Businesses in FAST changing areas (eg IT) will try to be FLAT to allow them to make decisions and communicate changes quickly. While businesses in SLOWER changing areas can be TALL because they do not have to make decisions and communicate changes quickly. MANAGEMENT STYLE Managers who like to DELEGATE work (ie pass some authority to other staff) will choose FLAT structures. While, managers who DO NOT like to DELEGATE work will choose TALL structures to get tighter control over staff. UNIT 1 - Functions and Organisation of Departments 33 HOW WILL THE STRUCTURE OF A BUSINESS CHANGE? Although a business may be tall or flat at one point in time, it is not likely to keep this exact structure year after year due to changes in the business. Examples of these changes that may occur and how they can affect the business can be seen below. Cause of Change Details Effect on Structure and Organisation Chart GROWTH  Increase in range of products.  Increase in product sales.  Increase in employees.  TALLER structure.  ORGANISATION CHART will EXPAND with new posts and perhaps new departments. DOWNSIZING  Redundancy of all levels of nonessential staff to save money but NOT reduce output.  FLATTER structure.  ORGANISATION CHART will CONTRACT with less posts and perhaps departments. DELAYERING  Removal of management layers to save money and widen spans of control.  FLATTER structure.  ORGANISATION CHART will CONTRACT with fewer managers. OUTSOURCING  Business buys in services instead of doing them itself. May result in downsizing or delayering.  FLATTER structure.  ORGANISATION CHART will CONTRACT due to fewer posts. UNIT 1 - Functions and Organisation of Departments 34 WHY MIGHT A BUSINESS CHANGE ITS’ STRUCTURE? Often businesses will change their structure from year to year (as we have seen above). The main reasons for these changes are shown below. Possible POSITIVE REASONS for changing structure        Improved communications within the business. Delegation of tasks to other departments or employees. Better efficiency and motivation from delegation. Reduced COSTS (ie staff costs, general running costs). More control over staff. More chances for promotion to motivate staff. More output and profits. NEW Structure FLATTER BUSINESS TALLER BUSINESS However, managers must remember to manage any changes to a business well, by asking staff opinions and keeping gthem up to date with what is happening. This is because if managers do not do this then there may be the following problems.     LOW STAFF MORALE (from redundancies, new management, etc). STAFF MAY NOT LIKE THE NEW STRUCTURE AND FIGHT CHANGE COSTS OF RESTRUCTURING – new staff, new buildings, new equipment, etc. LOST CUSTOMERS - customers can go to other businesses if they are unsure about who to contact in the new structure. UNIT 1 - Functions and Organisation of Departments 35