3rd Bac - Operational Plan. Functional Areas. Organisational Structure

 Generally, a business has four basic areas of operation: marketing, production, finance and human talent. These functions, at the beginning of the business operation, tend to be fulfilled, often in unison, by the entrepreneur himself. From the point of view of systems thinking, for these areas to generate the expected results, it is necessary that they work under a functional articulation approach; that is, under the premise that they are parts that operate in an interrelated manner around a whole, the business, which pursues a common goal.  

 

 

When setting up a company, from the perspective of the functional areas´ existence, why does the entrepreneur often become an orchestra person? 

In almost all cases, the functional areas of a new company are usually related to the areas of marketing, finance, production and human talent management. At the beginning, these areas may be brought together, but they may be interrelated, witin the same physical location and performed by person only.

Businesses organize their human resources in various ways. 

In a small business, such as a sole proprietorship, there may be an informal organizational structure; the owner has a range of functions including marketing, operations and finance. Roles can be changed depending on the demands of the job at a particular point in time. The owner also carries out more mundane tasks such as being a sales person and a stock controller. However, in most businesses there is a need for a more formal and organized structure. This helps a business to
function more efficiently due to:

• Accountability - shows who is held responsible (or answerable) for each particular job, e.g. the marketing staff are held accountable to the marketing director for their performance.
• Responsibility - shows who is in charge of whom and in what roleor capacity, e.g. the operations director being in charge of all production workers. 

An organization chart shows five important features of a business:

• There are four functional departments shown: Marketing, Production, Finance and Human Resources.

•  The chain of command
• The span of control
• The official channels of communication
• The levels of hierarchy
  

An inefficient organizational structure can cause staff demotivation, a duplication of effort, communication problems, difficulties in coordination and poor decision-making.

 

Case study
"In 2014, the Bank of Italy flattened its organizational
structure, with decision-making power decentralized to
the central bank's eight directors. The restructuring was
part of the bank's five-year plan to cut Its staff by 10%."

 Organizational structure by product, function and region 

The organizational chart shows organization by product, function and region.

•  Function: There are three vice presidents of the business, each in charge of one functional area (Marketing, Production and Finance).

• Region: Plant managers are located in Taiwan, Singapore and Vietnam. They are accountable to the vice president in charge of production. Thesame structure exists in these locations for the marketing and finance departments.

• Product: Within each region, there is organization based on either consumer products or industrial products. 

    

  On the other hand, in a project-based organization, human resources are
  organized around particular projects. Many businesses use a project-based organizational chart, such as those in construction, software engineering, entertainment, aerospace and oil exploration.
   
  
  

   

Homework (For next class)

1. Write the definition and a sentence using the following words.

• delegation .
• span of control . 
• levels of hierarchy
• chain of command . 
• bureaucracy . 
• centralization . 
• decentralization . 
• de-layering

2. Draw a structural organisational chart for your future personal project or business. Specify also the type of business or project with the functions of each job position.