13 DISTRIBUTION

distribution
*refers to the location where consumers can buy products from

distribution channels
*route taken by a product from the producer to the customer

- four stage distribution channels are likely to be used by fast-moving consumer goods,
such as potato crisps and breakfast cereals

- three stage distribution channels are likely to be used by clothes producers and travel
companies

- two stage distribution channels are likely to be used when selling online

wholesaling
*the four-stage channel of distribution

- wholesalers usually buy from manufacturers and sell to retailers

- wholesalers may break bulk, repack goods, redistribute smaller quantities, store goods
and provide delivery services
- a wholesaler stocks goods produced by many manufacturers → therefore retailers get to
select from a wide range of products
retailing
- both the three and four-stage distribution channels use retailers
- these are businesses that buy goods and sell them straight to consumers

- they provide a number of services:

● they buy large quantities from manufacturers and wholesalers, and sell small
quantities to customers → breaking-bulk.
● they sell in locations that are convenient to consumers.
● they may add value to products by providing other services → help with packing
or delivery, repair services, information about products, warranties and wrapping
products as gifts

- due to consumer behaviour variation in different countries, the demand for the different
types of retail outlets will vary

two-stage distribution
- some producers market their products directly to consumers, eg. banks,
solicitors, hairdressers, dentists, plumbers, restaurants, and taxis do not normally
use intermediaries
- some manufacturers may use direct selling as well

other methods include:

1) the internet
- a rapidly growing number of retailers sell their products online

2) direct mail
- where suppliers send promotions through the post directly to customers
inviting them to buy products
 3) door-to-door selling
- where salespeople visit households directly, inviting people to buy
products or services
- this method of distribution is in decline due to complaints about the tactics
used by some of the door-to-door sellers

4) mail order catalogues

- where catalogues are distributed to customers who may buy the products
illustrated - sometimes on credit

5) direct response adverts

- some businesses place adverts in newspapers, magazines or on
television inviting people to buy goods and services

6) shopping parties
- representatives organise parties and invite people to attend for an
enjoyable social occasion while having the opportunity to buy products
such as jewellery, cosmetics, kitchenware, and fashion accessories

7) telephone selling
- although many people do not welcome telephone calls from businesses
trying to sell them goods and services, the practice is still widespread

- main advantage is that intermediaries are not required, so producers are able to make
more profit
- producers can also reach customers who do not like going to shops
- main drawback is that with some methods people cannot physically see the products
until they have been purchased
- some people object to direct mail, door-to-door salespeople and unwanted telephone
calls

agents or brokers
*some producers using four- or three-stage channels of distribution may use agents or brokers
in the distribution process to link buyers and sellers

- used in a variety of markets

- travel agents sell holidays and flights for holiday companies, airlines and tour operators
- estate agents sell properties on behalf of vendors
- agents are also used to sell insurance, life insurance and other financial products
- manufacturers may also use agents when exporting.

agents can reduce the risk of selling overseas because they have knowledge of the country and
the market
choosing the appropriate distribution channel
the channels of distribution chosen by a business will depend on a number of factors:

1) the nature of the product

- different types of products may require different distribution channels

● most services are sold directly to consumers; it might not be appropriate for
window cleaners, gardeners, and hairdressers, for example, to use
intermediaries → this is because, unlike goods, services cannot be held in stock

● fast-moving consumer goods like breakfast cereals, confectionery, crisps, and

toiler paper cannot be sold directly from manufacturers to consumers → this is
because such goods could not be sold effectively by manufacturers in single
units; wholesalers and retailers are used because they break bulk

● businesses producing high-quality ‘exclusive’ products, such as perfume and

designer clothes, will choose their outlets very carefully → the image of their
products is important, so they are not likely to use supermarkets, for example

● products that need explanation or demonstration, such as technical products or

complex financial products might need to be sold by expert salespeople or
specialists

2) cost
- businesses will normally choose the cheapest distribution channels, they also
prefer direct channels → if intermediaries are used they will take a share of the
profit
- large supermarkets will try to buy directly from manufacturers as they can bulk
buy and get lower prices
- independents are likely to buy from wholesalers and will have to charge higher
prices as a result
- many producers now sell directly to consumers from their websites → this helps
to keep costs down

3) the market
- producers selling to mass markets are likely to use intermediaries
- in contrast, businesses targeting smaller markets are more likely to target
customers directly
- producers selling in overseas markets are likely to use agents because they
know the market better
- businesses selling goods to other businesses are likely to use more direct
channels
 4) control
- for some producers, it is important to have complete control over the distribution
- for example, producers of exclusive products do not want to see them being sold
in less prestigious outlets as they might damage their image
- heating systems require expert installation and need to comply with health and
safety legislation → producers of such products might prefer to handle the
installation themselves and deal directly with customers, they can then ensure
safe installation more easily

changes in distribution methods

- the way in which goods and services are sold is subject to change

many of these changes reflect technological developments and social trends:

● a huge growth in online shopping
● the building of large US-style shopping malls
● sellers using call centres to sell products, such as financial services
● supermarkets extending their product ranges and opening hours
● shopping becoming more of a leisure activity for many people
● a growth in the use of television shopping channels

online distribution
- most important new trend is probably the development of online distribution
- it is often called e-commerce because it involves the use of electronic systems to sell
goods and services

there are two main types:

● business to consumers (B2C)
- the selling of goods and services by businesses directly to consumers
- click & collect services
- most large retailers now have online services

other examples of B2C e-commerce include:

● tickets for air, rail and coach travel
● tickets for sports fixtures, cinemas and attractions
● holidays, weekend breaks and hotel rooms
● access to online music and film broadcasts
● a wide range of goods on eBay and other auction sites

● business to business (B2B)

- involves businesses selling to other businesses online
- businesses can also use specialist software to purchase resources
- the software helps to find the cheapest supplier and carries out all the
paperwork
 drawbacks for businesses of online distribution
- face increasing competition since selling online is a relatively cheap method of
distribution as it can be organised from any location in the world, at any time of the day
- businesses will face more competition from overseas
- there is also a lack of human contact, which might not suit some customers, and there is
heavy dependence on delivery services where online retailers often lack control on the
quality of delivery
- there may also be technical problems online, for example, websites can crash or be
attacked by viruses, and internet connections can be unreliable another drawback is that
some people do not have access to the internet or may not use credit cards → this
would result in lost customers
- there is also a security risk as computer hackers might gain access to sensitive
information.

drawbacks for consumers

- include not being able to physically inspect goods before purchase and the risk of poor
after-sales service
- fake businesses may be more difficult to identify online and people may have problems
taking delivery of goods, for instance, if they are at work all-day

changing from product to service

- in most Western economies the size of the tertiary (service) sector has grown at the
expense of the primary (agriculture and mining) and secondary (manufacturing and
construction) sectors
- businesses have to focus more on the distribution of services
- most services are sold directly to consumers, so businesses have to consider more
carefully the range of direct distribution channels that are available

- businesses that once sold products are now selling services and have to consider how
this impacts their distribution
- businesses have to adapt to changes in technology and consumer buying habits
14 APPROACHES TO STAFFING

approaches to staffing
- different businesses have different approaches to their staff
- some view staff as an asset, while others view them as costs → these approaches might
have implications for levels of productivity

staff as an asset
- employers who view their staff as assets will value their employees and have concern for
their welfare
- staff will be valued because employers recognise that their efforts will help the business
to perform more effectively

such employers will therefore try to meet the needs of employees

this might involve providing:
● acceptable remuneration
● reasonable holidays, sick leave, maternity/paternity leave and pensions
● a safe and comfortable working environment
● training, so that staff can develop skills and carry out work tasks successfully and
safely
● job security and opportunities to interact with colleagues
● recognition and professional relationships
● clear and effective leadership
● chances for promotion
● opportunities to solve problems, work in teams and be creative

- if employers treat staff as assets, they will also make an effort to retain them
- they know that while money may not be the motivator for all employees, it is still
important and they may well provide above-average wages
- this approach is likely to help recruit, retain and motivate high-quality staff
staff as a cost
- if employers view their staff as a cost, their focus is likely to be different
- like any other cost, they will try to minimise it wherever possible

this might involve:

● paying just the legal national minimum wage
● using a zero-hours contract
● neglecting investment in training
● using financial incentives to raise productivity
● providing the minimum legal ‘employee right’ in relation to sick leave, holiday pay,
and working conditions
● having penalties for employees who are late, break rules, etc. and who incur
costs for the business
● using cheap and inferior recruitment methods

- this approach might lower employment costs, but it may also be a ‘false economy’
- this is because productivity might be lower due to poor motivation
- staff turnover and rates of absence may also be higher and there may be more conflict
between staff and management
- treating staff as costs may leave workers feeling exploited, neglected, stressed and
unhappy in their work

flexible workforce
- most businesses prefer to employ a flexible workforce → helps to adapt to change more
easily
- if output needs to be increased quickly a business with a flexible workforce might be able
to make more use of temporary workers

businesses can increase the flexibility of their workforce using a number of methods:
1) multiskilling
- the process of enhancing the skills of employees

- giving individuals the skills and responsibilities to deal with a greater

variety of issues will allow a business to respond more quickly and
effectively to problems

- certain motivation theories suggest that giving individuals more skills and
responsibilities can improve their work performance

- a criticism of multiskilling is that individuals are only given more skills so

they are expected to work harder without any extra pay
2) part-time and temporary staff
- some people prefer to work part-time because it suits their lifestyle
- the use of part-time staff provides flexibility for businesses
- part-time staff can be employed during weekend peak hours
- temporary staff are employed only for a limited period of time
- many businesses need temporary workers from time to time, eg. help
during busy periods, such as the harvest period or Christmas

3) zero-hour contracts
- also known as casual contracts offered for ‘piece work’ or ‘on-call work’

zero-hour contracts mean that:

● workers are on call to work when the employer needs them
● employers do not have to give them work
● employees do not have to work when asked

- workers on zero-hour contacts do have certain rights; in some countries,

they are entitled to the minimum or living wage, paid holidays, rest
breaks, protection against discrimination, excessive working hours and
illegal wage deductions
→ in other countries zero-hour contracts are considered
exploitative

- it is felt that they give too much power to employers, putting people with
families and mortgages to pay in a difficult position
- they are considered a financially insecure form of employment

- some employers like zero-hour contracts because they help provide a

flexible workforce and are a cheaper alternative to employing agency staff
- they can also be used to cover temporary staff shortages

4) flexible hours and home working

- the workforce is more flexible if staff work flexible hours

- one of the main advantages to businesses with flexible hours is that they
can often remain open for longer

- some people prefer to work from home because it suits their lifestyle → it
also reduces travelling time to and from work

- businesses benefit from home working because certain costs, such as

office space, equipment, heating and lightning might be reduced

- there also will be fewer problems with staff absence rates and less
disruption due to bad weather and transport delays

- however, there may be communication problems if staff cannot be

contacted and it is more difficult to monitor the quality and quantity of
work undertaken
 5) outsourcing
- involves getting other people or businesses to carry out tasks that were
originally carried out by people employed by the business
- outsourcing allows a business to focus on its main capabilities and lets
others carry out the surrounding work

advantages
- costs are lower and capacity can be increased
- the work outsourced may also be undertaken more effectively
especially if specialists are employed

disadvantages
- loss of control and dependence on suppliers that businesses may
develop
- employees may also respond negatively to outsourcing because
their jobs might be threatened

the advantages and disadvantages of a flexible workforce

advantages

1) a flexible workforce allows a business to expand and contract quickly in response to

changes in demand for its products → a workforce made up of permanent staff is difficult
to shrink quickly because of the cost and because of the time it takes to fulfil legal
requirements

2) some specialist jobs need to be done but it would be wasteful to employ a permanent
worker to do them

3) in some cases, temporary staff or subcontractors are cheaper to employ than permanent
staff → in some cases, it may be more expensive because temporary staff or their
agencies are able to secure a higher pay

4) temporary staff can be laid off almost immediately when they are not needed, with little
cost, which is not the case for permanent staff

5) employers are responsible for training their permanent workers; by outsourcing work or
employing temporary workers, businesses may be able to pass that cost onto
subcontractors

6) employing workers who can job share or work flexible hours may allow a business to
operate more efficiently
disadvantages

1) temporary staff may have less loyalty to the business where they work temporarily →
only motivated mainly by financial gain

2) outsourced work can be of poor quality, damaging their reputation; temporary staff just
move on and do not have to take responsibility for the poor work, but the business may
have lost customers as a result

3) communication can be a problem, temporary workers may not be available when the
business would like to communicate with them

4) employing part-time workers can be a costly process

5) temporary staff can be excellent, well-qualified, and highly motivated → some temporary
staff are simply workers who have found it difficult to hold down a permanent job, when
employing temporary staff, there is no guarantee that they will perform their job as well
as a permanent member of staff

6) too many temporary workers employed alongside core workers can cause demotivation
among the core workers; core workers may want to be part of a stable team to form
relationships and fulfil some of their higher-order needs → constant turnover of
temporary workers may lead to core workers feeling unsettled

distinction between dismissal and redundancy

dismissal
- employees may be dismissed for a number of reasons → these may be for unfair
reasons, such as joining a trade union

- there are legal reasons, however, for dismissing an employee → these may include
misconduct or because an employee is incapable of doing a job

- a period of notice is required, but the length will vary depending on how long the
employee has worked for the business

redundancy
- where there is insufficient or no work for the employee to do

- they must have a contract of employment

- workers are most likely to be made redundant during a recession or when a business is
struggling due to external factors
employer/employee relationships
- when someone gets a job the relationship behind between the employee and the
employer
- the quality of this relationship is important because it has an impact on the welfare of the
employee and the performance of the business

- however, relationships between employees and employers can be difficult; this is

because the objectives of the two groups are sometimes in conflict:

1) rates of pay
- employers often attempt to restrain wage growth to help control their
costs and remain competitive

- in contrast, employees want higher wages to keep up with rises in the

cost of living and hopefully raise their living standards

2) the introduction of technology

- employers are often keen to use new technology because it helps to
increase efficiency in the business

- however, employees may resist the introduction of technology because

they are anxious about learning new production techniques or may fear
losing their jobs as work processes are taken over by machines

3) flexible working
- employers prefer to employ a flexible workforce because it helps to
manage production more effectively and keep costs down

- however, some methods used to develop more flexibility, such as

zero-hours contracts, can be unpopular with employees

4) work conditions
- employees may want better conditions or facilities from employers, such
as the provision of care facilities for workers’ children

- however, employers may consider such things inappropriate or too

expensive

individual approach

- an increasing number of employers develop relationships with employees at an

individual level
- this approach means that individuals will negotiate wages, holidays and other
benefits, hours of work and other terms of employment, directly with the employer

collective bargaining

- involves determining wages, conditions of work and other terms of employment through
a negotiation process between employers and employee representatives, such as trade
union representatives
- trade unions represent the views of their members and try to negotiate in their interests;
one individual would have little or no influence in determining wages and conditions
 for collective bargaining to take place:
1) employees must be free to join representative bodies, such as trade unions

2) employers must recognise such bodies as the legal representatives of workers and
agree to negotiate with them

3) such bodies must be independent of employers and the state

4) bodies should negotiate honestly with their members’ interests

5) employers and employees should accept negotiated agreements without having to use
the law to enforce them

bargaining between employers and employee representatives has often led to conflict in
the past; a failure to reach an agreement may result in industrial action

industrial action like this can damage the employer, employees, and customers
15 RECRUITMENT, SELECTION, AND TRAINING

recruitment
- when businesses hire new employees they need to attract and appoint the best people

a business may need new staff because:

● the business is expanding and more labour is needed

● people are leaving and they need to be replaced

● positions have become vacant due to promotion

● people are required for a given period to cover temporary staff absence, due to
maternity or paternity leave, for example
stages in the recruitment and selection process

1) identify the type and number of staff needed

- the first stage is to identify the number and type of staff that need to be recruited
→ overall business plan will help provide this information.
- eg, if the business is planning to expand, larger numbers of applicants will need
to be attracted
- a business may also need to choose between full-time, part-time, temporary,
and permanent workers

2) prepare job description and person specification

- the right people are more likely to be selected if a job description and person
specification are drawn up

3) advertise the job using appropriate media

- advertising costs money
- businesses must place job advertisements in media where they are likely to
attract sufficient interest from the ‘right’ sort of applicants

4) evaluate applicants and select a shortlist for interview

- job applications can be made on standard forms shared with applicants who
respond to an advert
- some applicants might write letters and include a CV (contains personal details,
qualifications, experience, names of referees, hobbies and reasons why the
person is suitable for the job)
 - business must sort through all the applications and draw up a shortlist to be
interviewed

5) carry out interviews

- shortlisted applicants may then be invited for an Interview → interviewers can
find out more about the applicants by asking questions
- gives candidates the opportunity to provide more detailed information and ask
questions about the job and the business
- interviewing is often best done by people who are experienced or have been
trained in interviewing
- for many jobs interviews are carried out by more than one person, providing an
opportunity for a discussion about the performance of candidates in their
interviews

6) evaluate interviews and make appointments

- after the interviews, the interviewers must decide who to appoint
- in many cases, interviewees are told the outcome of the interview by post at a
later date → gives the business more time to evaluate the performance of the
candidates
- a business might also check references before making a final decision.

7) provide feedback for unsuccessful candidates

- the recruitment process ends when a job offer has been made and accepted
- it is also polite to provide feedback to the unsuccessful candidates

an increasing number of businesses are using online recruitment methods, people can submit
application forms online and in some cases might be asked to complete an online test →
people can apply for jobs at any time and their application details can be stored by a business,
it is also a cheap alternative to traditional methods

job description
- a job description states the title of a job and outlines the tasks, duties, and
responsibilities associated with that job

- the main purpose of a job description is to show clearly what is expected of an

employee

- extracts from it are likely to be used in a job advertisement

person specification
- provides details of the qualifications, experience, skills, attitudes and any other
characteristics that would be expected of a person appointed to do a particular job
- it is used to assess applicants when sorting through the applications

internal and external recruitment

internal recruitment
- recruitment from within the business

advantages
1) often cheaper because no adverts have to be placed and paid for at
commercial rates

2) internal recruits might already be familiar with the procedures and

working environment of the business → may need less induction training
and be more productive in the first year of employment

3) the qualities, abilities, and potential of the candidates should be better

known to the employer → often difficult to predict exactly how an
external recruit will perform in a particular work environment

4) regular internal recruiting can motivate staff; they might see a career
progression with their employer

external recruitment
- when someone is appointed from outside the business

advantages
1) the employer may want someone with new and different ideas from
those already working in the business → bringing in the experience of
working in different organisations can often be helpful in keeping a
business competitive

2) external recruitment might attract a larger number of applicants than

internal recruitment → the employer then has more choice of whom to
appoint

● word of mouth
- a person hears about a job from someone else, often someone who works in the
place of employment

● direct application
- many jobseekers send their details to employers for whom they would like to
work just in case they have a vacancy
● advertising
- the employer may place advertisements in local or national newspapers, and
specialist magazines and journals

- the internet is another medium for job advertisements; they may appear on a
company website

- advertisements are sometimes costly but can reach a wide number of potential
applicants

● private employment agencies

- the business may employ a private employment agency to find candidates

- private employment agencies are probably best known for finding temporary
workers

- using an employment agency should take much of the work out of the
recruitment process for the employer

- can also be costly because the employment agency charges a fee

● headhunting
- where the agency draws up a list of people they think would be suitable for a job

- having cleared the list with the organisation making the appointment, the agency
will approach those on the list and discuss the possibility of them taking the job

- headhunting works best where there is only a limited number of people who
potentially could take on the post and where the agency knows about most of
these people

● jobcentres
- businesses can advertise vacancies through jobcentres run by the government

- often used by the unemployed and vacancies tend to pay less than the average
wage

- a relatively cheap way of advertising, but not suitable for many vacancies

● government-funded training schemes

- some businesses take on trainees from government-funded training schemes
costs of recruitment, selection, and training

- costs can be significant and underline the importance of employing an effective

recruitment process to attract and retain high-quality staff
- there are two elements to this cost - lost output while a replacement is found and
inducted, and the process costs of recruiting and selecting a new worker

some of the main costs incurred are outlined below:

● recruitment and selection costs
- costs are incurred throughout the whole recruitment and selection
process

- the human resources department will incur costs when identifying the
number and type of staff required

- some administrative costs will be incurred when checking and updating

job descriptions and person specifications → these costs will be higher if
the jobs have changed or have been newly created

- jobs will have to be advertised; if internal recruitment is being used, costs

will be lower but if external recruitment is used costs will be higher

- time will be spent handling and sorting applications; further costs are
incurred if interviewees are contacted by post or phone

- the interviewing process can also be expensive for a business; may

require sit tests or undertaking personality assessments

- the performance of interviewees will have to be evaluated → the more

people involved, the higher the cost

- sometimes the new person recruited will negotiate a higher salary or

better benefits than the outgoing person they are replacing, again adding
to the business’ costs

● training costs
- can be so high that businesses can be reluctant to invest heavily in
training

examples of training costs:

1) training courses and other resources
2) loss of output
3) employees leaving
training
- the process of increasing the knowledge and skills of workers so that they are better
able to perform their jobs

the objectives of training differ from business to business but they include:
1) making workers more productive by teaching them more effective ways of
working

2) giving workers the skills they need to use new equipment or technology

3) educating workers in new methods of working, such as shifting from production

line methods to cell methods

4) making workers more flexible so that they are able to do more than one job role

5) preparing workers to move into a different job role within the business, which
could be a new job at a similar level or a promotion

6) improving standards of work in order to improve quality

7) implementing health and safety at work policies

8) increasing job satisfaction and motivation, because training should help workers
feel more confident in what they are doing and they should gain self-esteem

9) assisting in recruiting and retaining high-quality staff, attracted by the quality of

training offered

induction training
- designed to help new employees settle quickly into the business and their jobs
- they might spend time in a number of departments, as well as being given more general
training about the business
- most induction training attempts to introduce workers to the nature of the business and
work practice, including health and safety issues

on-the-job training
- training given in the workplace by the employer

there are many ways in which this could happen:

1) learning from other workers
- an employee might simply work next to another worker, watch that
worker do a task and with their help repeat it

2) mentoring
- where a more experienced employee is asked to provide advice and help
to a less experienced worker
 3) job rotation
- where a worker spends a period of time doing one job, and then another
period of time doing another job
- eventually, they have received the broad experience needed to do a
more specialist job

4) traditional apprenticeships
- involves a mix of training methods

5) graduate training
- medium- to large-sized businesses may offer graduate training
programmes
- they are typically designed to offer those with university degrees either
professional training or managerial training

off-the-job training
- training which takes place away from the immediate workplace

- can provide courses which a business internally would be unable to provide

- can be expensive, particularly if the business is paying not just for the course but also a
salary for the time the employee is attending the course
benefits of training
- although it is expensive, a number of stakeholders will benefit from training

● managers
- workers may be better motivated and more satisfied → makes them more
co-operative and easier to work with, they will be better at doing their job
- workers may also be more flexible which will help managers in their
organisation
- providing training may also improve the image of the business and make
it easier to attract and retain high-quality staff

● owners
- businesses will benefit from training if productivity is higher → means that
costs will be lower and the business might gain a competitive edge in the
market
- this should improve the financial performance of the business, with higher
profits and higher rewards for the owners

● employees
- if workers have been trained they will be able to do their jobs more
effectively
- this should reduce anxieties about their work and provide more job
satisfaction
- employees will feel valued if their employer is paying for their training
- they may also feel better motivated, less stressed out and enjoy more job
satisfaction
- they are likely to develop a range of skills that they can use in the future -
to gain promotion or get a better job

● customers
- if training improves quality and skills, then customers will benefit from
better quality products and improvements in customer service following
training, such as a better outcome when making complaints.
16 ORGANISATIONAL DESIGN

authority the right to command and make decisions

chain of the way authority and power are organised in an organisation

command

centralisation a type of business organisation where major decisions are made at

the centre or core of the organisation and then passed down the
chain of command

decentralisation a type of business organisation where decision-making is pushed

down the chain of command and away from the centre of the
organisation

delayering removing layers of management from the hierarchy of an organisation

delegation the passing of authority further down the managerial hierarchy

empowerment giving official authority to employees to make decisions and control

their own work activities.

formal the internal structure of a business as shown by an organisational

organisation chart

hierarchy the order or levels of responsibility in an organisation, from the

lowest to the highest

organisational a diagram that shows the different job roles in a business and how
chart they relate to each other

responsibility the duty to complete a task.

span of control the number of people a person is directly responsible for in a

business

subordinates people in the hierarchy who work under the control of a senior worker
organisational structures
- the structure is the way in which positions within the business are arranged → often
known as the internal structure or formal organisation of the business.

● the organisational structure of the business defines:

1. the workforce roles of employees and their job titles
2. the route through which decisions are made
3. who is responsible and who is accountable to whom, and for what activities
4. the relationship between positions in a business
5. how employees communicate with each other and how information is passed on.

- different businesses have different objectives, relationships and ways in which decisions
are made → may have different structures.
- small businesses are likely to have simple structures, larger businesses are often divided
into departments with managers.
- structure helps businesses divide work and coordinate activities to achieve objectives

- one method of organising a business is where managers put people together to work
effectively based on their skills and abilities. The structure is ‘built up' or it ‘develops’ as a
result of the employees of the business. In contrast, a structure could be created first,
with all appropriate workforce roles outlined, and then people employed to fill them

hierarchy
- some businesses produce an organisational chart
- these illustrate the structure of the business and the workforce roles of people employed
in the business

organisational chart show:

● how the business is split into divisions or departments
● the roles of employees and their job titles
● who has responsibility
● to whom people are accountable
● communication channels
● the relationships between different positions in the business

- the hierarchical nature of the structure shows that employees have different levels of
authority and responsibility
employee roles in the organisational hierarchy
- the positions in an organisation will have particular workloads and jobs allocated to them

1) directors:
- appointed to run the business on behalf of its owners

- in overall charge of activities in an organisation

- some directors, known as executive directors, will be involved in the

running of a business

- the managing director will have overall responsibility for the organisation
and have authority over specific directors

2) managers:
- responsible for controlling or organising within the business

- they often make day-to-day decisions about the running of the business

- a sales manager, for example, would have responsibility for sales in the
business and be responsible to the marketing director.

- businesses often have departmental managers, such as the marketing,

human resources, finance and production managers

- may also be regional managers, organising the business in areas of a

country, or branch managers, organising particular branches or stores.

3) team leaders:
- members of a team whose role is to resolve issues between team
members and co-ordinate team efforts so that the team works effectively

- a team leader may be part of a permanent cell production team or a team

set up for a particular job, such as investigating staff motivation

- may also take responsibility for representing the views of a team to the
next higher reporting level, for example, to report the conclusions of a
market research team

4) supervisors:
- monitor and regulate the work in their assigned or delegated area

- may be given some of the roles of managers, but at a lower level

→ their roles in this case may be to hire, discipline, promote, punish or
reward

5) professionals:
- positions for staff with high levels of qualifications and experience
 - likely to involve a degree of decision-making and responsibility in ensuring
that tasks are carried out effectively to a high standard

- eg. doctors, architects, stockbrokers, product designers, chefs, and

accountants

6) operatives:
- positions for skilled workers who are involved in the production process of
service supervision

- carry out the instructions of managers or supervisors

- in their own area of activity, they may have to ensure targets are met and
tasks are carried out effectively

examples of operatives in business might include staff in:

- production, eg. assembling a car or manufacturing furniture
- warehousing, eg. checking invoices against goods and ensuring
effective deliveries
- IT, eg. giving technical support to machinery

7) general staff:
- a variety of positions in business that are carried out by staff with
non-specific skills

- follow instructions given by superiors to carry out particular tasks and are
an essential part of the production process or service provision

- eg. checkout staff, shelf fillers, cleaners, receptionists

chain of command
- the hierarchy in a business is the level of management in a business, from the lowest to
the highest rank.
- it shows the chain of command within the organisation - the way authority is organised
- orders pass down the levels and information passes up
- businesses must also consider the number of links or levels in the chain of command
- each extra level of management in the hierarchy reduced the effectiveness of
communication by about 25 per cent.
- businesses generally try to keep chains as short as possible

span of control
- the number of people, or subordinates, a person directly controls in a business
- if a production manager has ten subordinates, their span of control is ten
- if a business has a wide span of control it means that a person controls relatively more
subordinates
 - someone with a narrow span of control controls fewer subordinates
- if the span of control is greater than six, difficulties may arise

Critical Evaluations in Business Management argued that the span of control should be
between three and six because:
● there should be tight managerial control from the top of the business
● there are physical and mental limitations to any single manager's ability to control
people and activities

authority and responsibility

- employees in the hierarchy will have responsibility and authority.

- responsibility involves being accountable or being required to justify an action

- eg. managers who are responsible for a department may be asked to justify poor
performance to the board of directors
- the human resources department may be responsible for employing workers.

- authority is the ability to carry out the task

- eg. it would make no sense to ask an office worker to pay company debts if she did not
have the authority to sign cheques
- employees at lower levels of the hierarchy have less responsibility and authority than
those further up
- however, it may be possible for a superior to delegate (pass down) authority to a
subordinate, e.g. a manager to an office worker, but continue to have responsibility
- increasingly, businesses are realising the benefits of delegating both authority and
responsibility.

centralisation and decentralisation

- centralisation and decentralisation refer to the extent to which authority is delegated in a
business
- if there was complete centralisation, subordinates would have no authority at all
- complete decentralisation would mean subordinates would have all the authority to take
decisions
- some delegation may always be necessary for all firms because of the limits to the
amount of work sénior managers can carry out
- tasks that might be delegated include staff selection, quality control, customer relations,
and purchasing and stock control even if authority is delegated to a subordinate, it is
usual for the manager to continue to have responsibility

- in pyramid structures, subordinates often have little authority, with most decisions being
taken at the top of the organisation → some would argue that this form of organisation
may not suit the various markets that a growing and competitive business could face.
types of organisational structure
- can vary between businesses as different businesses have different needs and possibly
have different views about the way staff should be organised and controlled

1) tall structures
- long chain of command
- a narrow span of control
- some advise that the number of levels should not exceed eight

2) flat structure
- fewer layers in the hierarchy
- chain of command is short
- span of control is wide
- structure means that employees are free from strict, close control in the
workplace → more freedom and responsibility

3) matrix structure
- allow businesses to connect people with particular specialist skills
- involve getting people together from different areas of the business to form a
project team
- individuals within the team each have their own responsibility
- teams are not fixed and can be made, altered or dissolved to suit the business
need at the time
- matrix structures are often used to solve problems in a business

implications of different organisational structures

the different structures used by businesses to organise their workforces have advantages and
disadvantages.

implications of each type are outlined:

1) tall structures
- with tall structures, the span of control can be small → managers have more
control over their subordinates

- employees can be more closely supervised

- there is a clear management structure and a clear route for promotion → might
help to motivate staff

- management costs will be higher since there are more managers

- communication can be poor → long chain of command, messages may become

distorted as they pass through the layer of management

- decision-making may also be slowed down as approval may be needed at each

level of management

- close-quarters control may be disliked by some staff and they could become
demotivated
2) flat structures
- communication is better because the chain of command is generally shorter

- communication is quicker and there is less potential for messages to be distorted

- management costs are lower because there are fewer layers of management

- decision-making can be quicker because approval from several managerial

layers is not required

- employees may be better motivated because they are less closely controlled

- employees are empowered → more responsibility for organising their work and
may be allowed to solve their own problems helps to make work more interesting

- managers may lose control of the workforce because the span of control is too
wide → discipline may start lacking, which can have a negative effect on
productivity

- there could also be co-ordination problems if managers are responsible for too
many subordinates → may become overworked

3) matrix structures
- based on the expertise and skills of employees, and gives scope for people lower
down the organisation to use their talents effectively

- for example, a product manager looking into the possibility of developing a new
product may draw on the expertise of employees with skills in design, research
and development, marketing, costing, etc.

- it is suggested that this structure improves flexibility and the motivation of

employees

- however, the method often needs expensive support systems, such as extra
administrative and office staff → there may also be problems with coordinating a
team drawn from different departments and with the speed of decision-making