CAT / FIA FBT Syllabus B. Business Organisation Structure, Functions - Basic Organisational Structure Concepts - Notes ^{3 / 7}

Ownership and management of larger organisations are often separated.

The separation of ownership and management has proven enormously beneficial to both owners and managers, since it brings together those who have capital but not necessarily the skills or time to run a business and those who have managerial skills but not necessarily the capital.

In order to ensure that managers are managing the business in the best interests of the owners, many safeguards/controls are put in place, which will lead to, for example, formal organisation structures being set up for an organisation.

Span of control and Scalar chain

The term Span of Control refers to the number of employees/subordinates directly responsible to a superior. 

Therefore, if a manager of a large organisation has 10 subordinates, the span of control is 10.

A number of factors influence a span of control:

1. Capabilities often limit the span of control (ability/inability to manager people)

2. Nature of the workload

3. Geographical. If over a wide area this becomes more difficult

4. Subordinates work. If they do a similar tasks

5. Nature of problems. If problems that take a lot of time to solve, it would suggest a narrow span of control (less people to manage)

6. A good interaction between subordinates would suggest a wide span of control as they are able to help each other

7. The level of support required

A scalar chain of command refers to all levels between the very top and the lowest in the hierarchy.   (Line of authority)

Fayol emphasised the need of having reporting relationships from top executive to the ordinary shop operative or driver, sensible, clear and understood.

Delayering

• This is the process of reducing the number of management levels from the bottom to the top.

• Here organisations are increasing the average span of control, reducing management levels and becoming flatter.

Tall and Flat organisations

• If the span of control is very limited, the number of organisational levels (scalar chain) will increase, as the organisation grows in size, the organisational structure becomes TALL.

• The fact that the number of immediate subordinates is limited at each level tends to create close supervision and increased dependence of the subordinate on his principal.

• A FLAT organisation is one which has a smaller number of organisational levels (scalar chain) and thus a wider span of control.