Organisation and management

The functional areas of a business

Once a business grows past a handful of people, nobody can do everything, so the work is split into functional areas, each responsible for one kind of task.

The functions depend on each other, and most case study answers are stronger for saying so. Marketing can promise a delivery date that operations cannot meet. Finance can refuse the machine that operations needs. When a question asks how one department's decision affects the business, the marks are in following it into another department.

Organisational structure

An organisational chart is a diagram showing who is responsible to whom.

• Level of hierarchy is a layer of the chart. Everybody on the same layer has the same rank.
• Chain of command is the route an instruction takes from the top of the chart to the bottom. Count the levels it passes through.
• Span of control is the number of people a manager is directly responsible for. Count the lines going down from one box.

The two structures fall out of that arithmetic, and they are the opposite of each other.

To interpret a chart in an exam, read the question before the diagram. If it asks for the span of control of a named person, count only the boxes directly beneath that person, not everybody below them in total. If it asks how many levels of hierarchy, count layers including the top one. Both are one-mark answers thrown away by careless counting.

The 0264 syllabus does not list the roles and relationships of directors, managers and supervisors, so a chapter on those in an older book is not the best use of your revision time.

Full-time, part-time and flexible working

A full-time employee works the standard week for that business, commonly around 35 to 40 hours. A part-time employee works fewer.

Flexible working changes when or where the job is done rather than how many hours it takes.

• Home working lets the employee work from home, in full or on some days. The business saves on office space and can hire from a wider area, and the employee saves the cost and time of travelling. Against that, supervision is harder, the employee may be distracted or isolated, and the work must be the kind that does not need the premises.
• Flexible hours let the employee choose their start and finish times around a core period. It helps people with childcare or study to stay in the job, cuts absence and lateness, and can extend the hours the business is open. It makes meetings harder to arrange and needs care if a task requires several people at once.

The functions of management

Delegation is passing authority for a task down to a subordinate, while the manager keeps the final responsibility for the outcome.

Leadership styles

0264 asks you to recommend and justify a leadership style for a given situation, so the styles are not a list to be recited. The choice is decided by the workforce and the decision in front of it. Skilled, experienced employees who are asked their opinion give better answers and feel valued, so a democratic style suits them. New staff on a production line with a safety risk need telling clearly, so an autocratic style suits them. A justified answer says which of those facts is true of the business in the case and why the other two styles were rejected for it, not simply that democratic leadership is nicer.

Downsizing and redundancy

Downsizing is reducing the size of the workforce in order to cut costs. Redundancy is dismissing an employee because the job itself is no longer needed, not because of anything the employee has done.

Reasons a business reduces its workforce:

• Automation. A machine or a computer system now does what people did, so fewer people are needed for the same output.
• Reduced demand for the products. Sales have fallen, so the business needs less output and fewer workers to make it.
• Need to lower costs. Wages are often the largest cost, so cutting staff is the quickest route to survival when profits are falling.
• The business has merged with another and now has two of every department, or has moved production to another country.

Redundancy is not free. There is usually redundancy pay to fund, the remaining staff are frightened and less motivated, the business loses skills and experience it may want back when demand recovers, and it may face bad publicity in the local area.

Recommending which employee to make redundant. This one needs care, because the sympathetic answer and the justified answer are not always the same. The decision rests on which skills the business will still need after the change, not on who has been there longest or who is least liked. Compare the candidates on what each contributes now and what each would contribute to the plan described in the case, and say what the business loses in each case. If the firm is buying machines to do the packing, the packers are the people whose work has gone; if it also loses the only trained maintenance engineer, the new machines stand idle. A recommendation that names the person and then explains why keeping each of the others would have cost the business more is what earns the evaluation marks.

Trade unions

A trade union is an organisation of workers that acts together to protect and improve the pay and conditions of its members.

Benefits to an employee of being a member:

• The union bargains on pay and conditions for the whole group, and an employer takes more notice of several hundred workers than of one.
• Advice and legal representation if the member is dismissed, disciplined or discriminated against.
• Pressure on the employer over health and safety, which the individual worker may be afraid to apply alone.
• Training, and in some unions financial or welfare benefits for members.

For the business, dealing with one union representative is quicker than negotiating with every employee separately, but a strong union can push wage costs up and can disrupt production if a dispute is not settled.

Common mistakes

• Counting everybody below a manager as their span of control. It is only those directly responsible to them.
• Saying a flat structure has a long chain of command. Fewer levels means a shorter chain.
• Writing that a tall structure is always worse. Close supervision and promotion chances are real advantages.
• Saying delegation passes responsibility to the subordinate. Authority is passed; the manager keeps responsibility.
• Describing an autocratic leader as simply unpleasant, instead of explaining when speed and control are what the situation needs.
• Recommending democratic leadership every time without any reference to the workforce in the case.
• Confusing redundancy with dismissal for poor work. Redundancy means the job has gone.
• Choosing who to make redundant on length of service or on sympathy rather than on the skills the business will still need.
• Writing that part-time staff are simply cheaper. The hourly rate is often the same; the saving is that hours are matched to demand.
• Saying a trade union exists to cause strikes. Its purpose is to represent members, and a strike is a last resort.

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