Business Studies · Ch 5 — Organising
Organisation Structure
Organisation Structure
The organising process produces a concrete outcome: the organisation structure. This is the formal framework that defines how tasks are divided, who reports to whom, and how different parts of the enterprise connect. An effective structure directly increases the profitability of the business. The need for a proper structure becomes urgent when an enterprise grows in size or complexity. A firm that never grows can keep the same structure for a long time, but that stagnation is dangerous — companies that refuse to change eventually close down or stop growing.
As an organisation expands, new functions emerge and the number of hierarchical levels increases. Coordination becomes difficult. To keep operations smooth and to respond to changes in the environment, management must pay careful attention to the structure. Peter Drucker put it sharply: “organisation structure is an indispensable means; and the wrong structure will seriously impair business performance and even destroy it.”
Definition: Organisation structure is the framework within which all managerial and operating tasks are performed. It specifies the relationships between people, work, and resources. By allowing correlation and coordination among human, physical, and financial resources, it enables the enterprise to achieve its goals. This structure is typically shown in an organisation chart — a diagram that maps out the hierarchy and relationships.
Span of management is a key factor that shapes the structure. It refers to the number of subordinates a superior can effectively manage. This number determines how many levels of management exist in the structure. A proper structure ensures smooth communication and better control over operations. It regulates and coordinates the responsibilities of individuals and departments, allowing the enterprise to function as an integrated unit.
The textbook gives a concrete example: Sunita’s travel agency. She divided the entire work into three functional areas — operations, sales, and administration. Operations includes travel counsellor, reservation and ticketing, and customer care. Sales includes the accounts executive. Administration includes book keeper, cashier, and utility personnel. This division of work on the basis of functions created an organisational structure that specifies the line of authority and responsibility.
Key points to remember:
- Organisation structure is the outcome of the organising process.
- It is essential for growth; a stagnant structure harms the enterprise.
- It provides the framework for performing managerial and operating tasks.
- It specifies relationships between people, work, and resources.
- It coordinates human, physical, and financial resources to achieve goals.
- It is represented visually in an organisation chart. …