Organizational Structure for Businesses - Introduction To Business - ثاني ثانوي

2.3 Organizational Structure for Businesses Link to digital lesson www.ien.edu.sa Learning Outcomes Once you have completed this lesson, you should be able to: 2.3.1 Explain important principles in designing an effective organization. 2.3.2 Compare alternative organizational structures for businesses. Key Terms Mission Statement Procedures Goal Organization Chart Focus on REAL LIFE Jamila's company has just approved a policy that allows some employees to telecommute. This means employees can work from home and complete their work using a computer and other technology. Jamila is interested in the idea but isn't sure if she should apply. She is afraid she might not be as motivated to complete her work every day if she doesn't have to go to the office and keep a regular schedule. She also is concerned that it may be much more difficult to communicate with coworkers and get feedback from her manager using the technology. Jamila also wonders if she will be viewed as a productive and valued employee if people don't see her at work every day. Policies LO 2.3.1 DESIGNING AN EFFECTIVE BUSINESS ORGANIZATION There are many challenges and uncertainties to overcome in creating a successful business. However, with perseverance and persistence, many businesses thrive. Successful businesses need more than a good product or service. Skilled managers, well-prepared and motivated employees, adequate resources, and effective procedures all contribute to business success. A business needs to be well organized to help people do their work properly. An effective business begins with a clear purpose and the application of key principles for organizing work. Setting Direction The direction for a business comes from its mission statement. A mission statement is a short, specific written statement of the reason a business exists and what it wants to achieve. Here is an example of the mission statement of Almarai, a Saudi Arabian dairy, beverage, and food producer: To provide quality and nutritious food & beverages that enrich consumers' lives every day. After a mission statement is developed, the business sets goals. A goal is a precise statement of results the business expects to achieve. Goals are used to define what needs to be accomplished and to determine if the business is successful. An example of a goal for an automobile manufacturer is "to produce the top-rated brand for quality and customer satisfaction." How does effective organization help a business "hit the mark"? 2.3 Organizational Structure for Businesses | 73 وزارة التعليم Ministry of Education 2024-1446 GE44.PATHWAYS.G02.ITB.SB.PP1.indb 73 08/05/2024 09:13

Finally, the business sets policies and procedures for the organization. Policies are guidelines used in making consistent decisions. Procedures are descriptions of the way work is to be done. Effective policies and procedures provide guidance and direction to people working in the organization. Principles of Effective Organization When several people work together, their work needs to be organized so they work together well and achieve their tasks. Several principles guide the effective organization of work. Responsibility, Authority, and Accountability Responsibility is the obligation to complete specific work. Authority is the right to make decisions about how responsibilities should be accomplished. Accountability is taking responsibility for the results achieved. In an effective organization, all managers and employees have a set of responsibilities as a part of their jobs. With every job assignment, they know they have the authority to make the decisions and obtain the resources needed to complete the assignment. They know they will be recognized and rewarded if they are successful. They will be held accountable if the work is not completed well. Unity of Command A key organizing principle is unity of command. Unity of command means there is a clear reporting relationship for all staff of a business. If there is confusion in assignments and unclear relationships among people who are working together, it will be hard for people to know what to do or where to go for help. For each work assignment, people need to know who is the leader and how decisions will be made. Span of Control The last organizing principle is span of control. Span of control is the number of employees who are assigned to a particular work task and manager. A large number of people working with little support from their manager cannot be effective. In the same way, a manager with only a very small number of people may provide too much control. Organizations need to make sure that workers have a balance of supervision and freedom to do their work. The span of control for well-trained, experienced, and motivated employees can be much greater than the span of control for new and inexperienced employees who are not enthused about their work. CHECKPOINT What is the difference between a mission statement and a goal? In an organization, every member has a specific role to fill. Describe some roles. P74 Chapter 2 | Business Organization Ministry of Education 2024-1446

LO 2.3.2 TYPES OF ORGANIZATIONAL STRUCTURES When only one person works in a business, there is little need for an organizational structure. The sole employee is responsible for all of the work. When more people are hired, there will need to be an agreement on what work each person will do and if one person has authority over the work of others. An organization chart is a diagram that shows the structure of an organization, classifications of work and jobs, and the relationships among those classifications. You can see a simple organization chart for a business in Figure 2-1. Business Organization Chart President VP of Finance VP of Operations VP of Marketing Senior Accountant Manufacturing Director National Sales Manager Chief Auditor Purchasing Manager Region 1 Sales Manager Region 2 Sales Manager FIGURE 2-1 Why is it important for employees to understand the structure of the company where they work? وزارة التعليم Ministry of Education 2024-1446 2.3 Organizational Structure for Businesses | 75

tit Work as a TEAM Imagine the students of your class are members of an organization. Using the example in this lesson as a guide, choose a type of organization and create a busi- ness organization chart. Organize the group into divisions within the structure, each with a specific function to perform. Functional Organizational Structure Most businesses use a functional organizational structure. In this type of organization, work is arranged within main business functions such as production, operations, marketing, and human resources. All of the people with jobs related to one of the functions will work together. They report to managers who are responsible for that function. The advantage of a functional organization is that people work with others who have the same skills. A drawback is that people become more focused on their specific function than on the success of the whole business. Often, people working in one function have little interaction with people in other parts of the business. Matrix Organizational Structure A newer organizational structure designed to overcome the drawbacks of the functional structure is the matrix organization. In a matrix organizational structure, work is structured around specific projects, products, or customer groups. People with varied backgrounds are assigned together because their expertise is required for the project or to serve the customer. The assignment may be temporary or long term. A matrix organization can be interesting and motivating to employees. They work with many different people. They are focused on a specific project or task. For example, a team might be assembled with a range of skills to develop a new type of green technology or a new building project. However, it can be confusing and inefficient without effective leadership and communication. CHECKPOINT What problems can result from the use of a functional organizational structure? 2.3 ASSESSMENT Key Concepts Determine the best answer. 1. True or False. Policies and procedures help provide direction for a business. 2. The obligation to complete specific work is a. responsibility b. authority c. accountability d. recognition 3. Which of the following is not shown on an organizational chart? a. the structure of an organization b. work relationships c. job descriptions d. classifications of jobs 76 Chapter 2 | Business Organization Ministry of Education 2024-1446

Make Academic Connections 4. Technology Use the Internet to collect examples of the mission statements of five businesses. Rate each mission statement in terms of how effectively it communicates the purpose and direction of the company. 5. Critical Thinking Many schools are organized using a functional organizational structure. Teachers are organized into departments such as Languages, Mathematics, Science, and Business. How could a school be organized using a matrix structure? Design an organizational chart that illustrates a matrix structure for your school. Describe the advantages and disadvantages of the matrix structure as applied to a school. وزارة التعليم Ministry of Education 2024-1446 2.3 Organizational Structure for Businesses | 77

BUSINESS IMPROVING SOCIETY BUILDING A SUSTAINABLE FUTURE As part of its commitment to building a sustainable future, Saudi Arabia is investing significantly in green and renewable energy. Saudi Vision 2030 has set the target to be Net Zero by 2060. Just some of the green developments include the launch of the National Renewable Energy Program and the King Salman Renewable Energy Initiative, the establishment of Saudi Investment Recycling Company, and the Green Riyadh Project. His Royal Highness, the Crown Prince Mohammed Bin Salman has said that, "Climate action will enhance competitiveness, spark innovation, and create millions of high-quality jobs." Investment is being injected into harnessing solar and wind power, with the establishment of Sakaka Solar PV Plant and Dumat Al Jandal Wind Farm. Many new initiatives are centred upon local communities, helping to improve the standard of living of all Saudi citizens. A pioneering development project, 'The Line' at Neom, will create a green city, "powered by 100% renewable energy”. Saudi Arabia is investing in green energy to build a sustainable future. Saudi Arabia's green plans are part of a wider global movement to reduce our environmental impact and support communities. Studying positive examples of change from other parts of the world can help to generate green ideas that might be applied in Saudi Arabia. More than 25% of the world's population does not have electricity, which means no water pumps, no lights, no refrigerators, and no real chance for a better life. As electricity is crucial to improving the standard of living, some young innovators have devised strategies to help bring electricity to their communities. For example, in Palmeras, a city in rural Brazil, people were leaving their farms because it was hard to earn a living in agriculture without electricity. This population shift put stress on city services and threatened the future of area farms. A local expert came up with a solution: small business communities powered by solar energy to serve the local farmers. A simple solar energy system providing enough electricity for one farm could be rented for about the same monthly amount as farmers were spending on kerosene, candles, and batteries. This dependable supply of low-cost solar energy would result in higher levels of food production. At the same time, information was provided on modern farming practices to help improve efficiency and sustainability. This is one example of how small changes can make big differences to local communities. Think Critically 1. In what ways might the standard of living improve when people have access to electricity? 2. Investigate not-for-profit organizations in Saudi Arabia that are helping communities to build a sustainable future. 78 Chapter 2 | Business Organization Ministry of Education 2024-1446