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Intro to Business

Organizational Structure for Business

Lesson 5-3
Designing an Effective
Business Organization

 Mission Statement
A short, specific written statement of the reason
a business exists and what it wants to

Mission and Vision of Skaggs Community

Health Center
Goals – precise statement of results the
business expects to achieve.

Used to define what needs to be

Used to determine if the business is
 Policies –  Procedures –
guidelines used in descriptions of the
making consistent way work is to be
decisions done

Effective policies and procedures provide guidance

and direction to people working in the organization.
Principles of Effective Organization
 Responsibility – obligation to complete
specific work.
 Authority – right to make decisions about
how responsibilities should be
 Accountability – taking responsibility for
the results achieved
Principles (cont.)
 Unity of Command – There is a clear
reporting relationship for all staff of a

 For each assignment, people need to

know who the leader is and how decisions
are made.
Principles (cont.)
 Span of Control – the number of
employees who are assigned to a
particular work task and manager.

 Organizations need to make sure workers

have a balance of supervision and
freedom to do their work.
Types of Organizational Structures
 Organization Chart – diagram that shows
the structure of an organization,
classifications of work and jobs, and the
relationship among those classifications.

VP of VP of VP of
Finance Operations Marketing

Senior Chief
Accountant Auditor

Functional Organization
 Work is arranged within main business
functions such as production, operations,
marketing and human resources
 People with jobs related to function will
work together
 Workers report to managers who are
responsible for that function

 Most businesses use functional style.

Functional Organization Structure

 Benefit  Drawbacks
 People work with  People become more
others who have same focused on their
skills specific function than
on the success of the
whole business
 People have little
interaction with people
in other parts of the
Matrix Organizational Structure
 Newer organizational structure
 Work is structured around specific
projects, products, or customer groups
 People with varied backgrounds work
together because expertise is required for
the project
 Assignment may be temporary or long-
Matrix Organizational Structure
 Benefits  Drawbacks
 Interesting and  Confusing and
motivating to inefficient without
employees effective leadership
 Work with many and communication
different people
 Focus is on specific
project or task