STRUCTURE OF A BUSINESS

ORGANISATIONAL SETUP
The organisational set up of a business involves the allocation
of responsibilities and functions to different components of an
organisation and delegating authority to each position in order
to ensure the smooth operation of the business so as to
achieve the planned objectives. It can also be defined as the
arrangement and interrelationship of the various component
parts and positions of a business.
Sound organisational structure involves dividing activities into
departments, divisions, units and sub-units, defining
relationships between heads and members that make up the
units. In other words an organisational structure must show the
flow of responsibilities, authority and channel of
communication.
ORGANISATIONAL CHART/ORGANOGRAM
Organisational chat is diagrammatic or graphic representation
or blue print of all the units divisions and departments and their
related duties in an organisation with view to making every
member be aware of the person he is directly responsible to. In
other words it is a diagram of an organisation's structure which
shows the various departments, functions and positions and
how they are related to one another.
FUNCTIONS/USES OF ORGANISATIONAL CHART

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1. Organisational chart depicts or shows the flow of line of
authority and responsibilities
2. It shows the various positions in an organisation
3. It shows the whole or entire structure of the organisation
4. It show the relationship between managers and
subordinates
5. It shows the entire management hierarchy
6. It shows the division of work
7. A Chart shows the type of work being performed and by
whom
8. It shows the division of labour and specialisation
9. It is useful for evaluating the strengths and weaknesses of
an organisation.
PRINCIPLES OF MANAGEMENT
1. CLARITY OF OBJECTIVE: The aim and objectives of an
organisation, the strategies and means of achieving them must
be clearly stated in order to make employees strive towards
achieving the planned objectives.
2. SPAN OF CONTROL: This is the number of subordinates
under the direct supervision of a manager to ensure efficiency
and effectiveness. The number of subordinates should be
restricted to what is mentally possible for him to control.

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3. UNITY OF COMMAND: This principle states that
subordinates should receive instructions from their boss only as
dual command affects effectiveness.
4. DIVISION OF LABOUR: The organization will be efficient if
work is divided into the smallest units as specialization
increases productivity.
5. EVALUATION PRINCIPLE: This principle helps to determine or
measure the contributions of every worker to the attainment of
the organisational objectives.
6. DISCIPLINE: Discipline must be maintained in all
departments in an organisation. Eg a fair disciplinary system
with penalties judiciously applied will definitely strengthen the
organisation.
7. REMUNERATION: Employees remuneration should be fair
and satisfactory to both the employer and employees alike.
8. AUTHORITY AND RESPONSIBILITY: both should match each
other, that is, Authority should be equivalent or commensurate
with responsibility for effective supervision.
9. ESPIRIT DE CORPS: Management should be guided by the
popular slogan: “United we stand. Divided we fall.” There must
be team spirit.
10. SCALAR CHAIN: Henry Fayol said, “a hierarchy is necessary
for unity of direction.” Formal communication must move up
and down the line of authority, i.e., vertical communication
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whereby there would be proper communication from the top
to the bottom and from the bottom to the top. Scalar Chain is
the formal line of authority which moves from the highest to
lowest rank in a straight line. The chain specifies the route
through which the information is to be communicated to the
desired person/location.
11. UNITY OF DIRECTION: People who engage in the same kind
of activities must have objectives in a single plan. Meaning that
the corporate interest must supersede individual interest.
TYPES OF ORGANISATIONAL STRUCTURE
These are four types of Organisational Structure in practice:
1. Line Organisation
2. Functional organisation
3. Line and staff organisation
4. Committee

1. Line Organisation: Line organisation refers to the direct

working relationship between the subordinates and the
superiors in which the line of authority and responsibilities
flow from the top executives to the lowest subordinates. A
line manager has unlimited authority over a subordinate
to whom he gives orders. This type of structure allows
authority to flow downwards and responsibility upward.
This means that authority is greatest at the top and
diminishes at each successive lower level of management.

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 This type of organisation is suitable for small or medium
sized enterprises

Advantages of Line Organisation

1. It is simple and is easily understood by the employees and
management.
2. Discipline is always maintained
3. There is clear cut identification of duties, responsibilities
and division of labour.
4. Decision making at all levels is made easy and simple.
5. It is based on the principles of unity of command and
scalar chain.
6. It is good for small organisations where specialisation is
not very important.
Disadvantages of Line Organisation
1. It is autocratic
2. Lack of specialisation at the supervisory level.
3. A manager may be responsible for too many things
4. There may be much pressure and demand on the top
managers.

2. Functional Organisation: Functional organisation is a setup

where certain functional relationship exist between
specialist or functional managers and line managers, e.g.
the personnel manager has a functional responsibility for
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 all activities concerning personnel in all the departments
of the organisation, even though each employee has his
own manager in their department.
Advantages of Functional Organisation
1. There are several supervisors and this makes for better co-
ordination
2. The system is flexible and conducive for growth and
expansion.
3. Experts are allowed to make use of their expertise for the
betterment of the company
4. It encourages division of labour and therefore promotes
efficiency.
Disadvantages of Functional Organisation
1. It is not easy to apportion blames for mistake
2. There may be lack of effective control
3. Authority can overlap (extend over)
4. Confusion can occur because there are too many experts
and bosses.
5. There is lack of fixed line of responsibility.

3. Line and Staff Organisation: The Line and staff organisation

is a combination of line or direct executives and the
specialists auxiliary services (functional) whereby a line or
organisation engages experts who are to advise the line
managers in the performance of their duties. The actual

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 work in the organisation is done by the line executives
while the staff are specialists who advise executives.
Advantages of Line and Staff Organisation
1. There is efficiency through specialisation
2. Technical experts are in better position to advise the line
managers on complex problems.
3. Decision making can be enriched because ideas can be
shared.
Disadvantages of Line and Staff Organisation
1. Staff manager may attempt to usurp (overthrow, Remove
ie. take position of power illegally or by force) line
authority.
2. Their idea may be unrealistic and unpracticable
3. Friction may also occur when staff managers’ report to an
higher authority in the scalar chain of command
4. There is possibility that staff experts may intentionally
undermine(lessen the effectiveness or power or ruin) the
authority of line managers
5. Staff managers have no line of authority and no
responsibility for what actually happened.

4. COMMITTEE: in the Committee type of organisation, the

management team is assisted by a number of standing
advisory committee. The advisory committee members are
appointed to carry out special duties. Such as making
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 recommendations or the execution of a project.
Committee is common in many business enterprises.
Advantages of Committee
1. It gives room for creating new ideas and better quality
decisions
2. They are democratic in nature
3. It helps in getting opinion from many individuals
4. It enhances likelihood of participation
5. They are setup to carryout special duties
6. People react favourably to a group decision than one man
7. They make recommendations to the officers of the
organisation.
Disadvantages of Committee
1. It leads to delay of routine work
2. Sometimes a committee may be too large for constructive
action
3. Decisions made are usually weak or inefficient
4. Accountability can be lacking since there is no individual
responsibility for decision made.

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AUTHORITY, POWER, ACCOUNTABILITY AND RESPONSIBILITY IN
AN ORGANISATION
 AUTHORITY: Authority can be defined as power which has
legitimacy (ability to be defended). It is the right to give
command or directive and to ensure compliance. A
manager can command or direct because he has the
authority to do so.
 POWER: Power can be defined as the ability to exert
influence and to compel obedience. To have power is the
ability to change the behaviour or attitudes of other
individuals through having the means of sanctioning them.
The power of an officer is derived from the authority given
to him.
 ACCOUNTABILITY: Accountability simply means a situation
whereby a subordinate is accountable to his superior in an
organisation for his actions and he is obliged to report to
his superior how well he has discharged his responsibilities
and use the authority delegated to him.
 RESPONSIBILITY: Responsibility can be defined as the
individual obligations to carry out the duties assigned to
him or her. The subordinates have assigned duty for which
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 they will be called upon to account to their superior. Henry
Fayol says, “Authority should be commensurate with
responsibility”. According to him, responsibility is feared
among the people, whereas authority is sought after. A
good leader should encourage those around him to accept
responsibility.
SPAN OF CONTROL: The span of control or span of
management refers to the number of subordinates a manager
can effectively control or number of subordinates working with
him. To ensure effective control, the number of subordinates
under a manager’s control should be restricted to what is
mentally possible for him to handle. Henry Fayol suggested that
it should be limited to between three and six.
FACTORS DETERMINING SPAN OF CONTROL
1. The Nature of work: If it is a complex job, it will require
more supervision and less number of subordinates while
routine jobs requires less supervision and large number of
subordinates.
2. The Qualification, Training and experience of the manager:
well trained and experienced manager effectively and
efficiently manage a large number of subordinates while
an inexperienced manager cannot do so.
3. The personality of the Manager: His leadership style as
well as the freedom to make decision will affect the span
of control.
4. The Size of the organisation: this determines the number
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 of subordinates to supervise or the span of control. The
larger the organisation, the larger the number of
subordinate to supervise, a small organisation requires a
small span of control.
5. The quality of Lateral Communication: The quality of
lateral communication which may enable the subordinates
to get job done without constant reference to the superior
for consultations.
Lateral communication occurs when two workers of the
same level discuss ideas. Eg manager talking to a manager
6. Level of technological Development: determines the
number of subordinates that will be put under the direct
supervision of a manager.
7. The calibre of subordinates: That is, their exposure,
experience, skills and educational background determines
the span of control. The higher the education and
experience, the lower the number of subordinates. Since
they can work without much supervision.
8. The Demands on a Managers time in other jobs: the
amount of time which a manager spends on non-
managerial tasks will determine the number of
subordinates he can effectively co-ordinate. If the demand
on his time is high, then he can only control few
subordinates.
9. Frequency of interpersonal relationship between a
manager and the subordinates: where the level of
relationship is cordial, the manager can control and
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 manage many subordinates.
DELEGATION OF AUTHORITY
Delegation of authority is the transfer of responsibility to a
subordinate, with sufficient authority to enable the subordinate
carry out the assignment while the superior will consider
himself accountable for the delegated job. The larger the
organisation, the greater the extent to which delegation of
authority is practiced.
PRINCIPLES OF DELEGATION
1. There must be balance of authority, responsibility, and
accountability in an organisation.
2. The principle of scalar chain of command must be clearly
specified (a HIERARCHY is necessary for unity of direction)
communication must move up and down the line of
authority
3. Responsibility cannot be delegated
4. There must be clarity in the functions given to each
department
Advantages of Delegation of Authority
1. Reduction of burden of work for the superior
2. Training of subordinates, through delegation of work they
can develop themselves
3. It saves time since managers can have enough time for
high level duties
4. Speedy execution of job
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 5. It makes smooth succession possible: When superiors
retire or are transferred, the subordinates can take over
from them since they have been adequately prepared.
6. Ensures cordial relationship between the subordinates and
the superiors
7. It motivates subordinates by making them use their
initiatives in order to contribute their quota to the
organisational efficiency and productivity.

Disadvantages of Delegation of Authority

1. It may lead to confusion if authority and responsibility is
not properly defined or stated.
2. Delegation may affect the quality of job when authority
is delegated to less experienced subordinates which
may reduce the quality of work
3. It leads to duplication of management efforts when
authority is delegated it can lead to duplication of
services
4. Delegation can be abused: whereby subordinates can
take over the job of the managers or not taking
appropriate action as at when due
5. Unfinished task: insufficient delegation may lead to
unfinished tasks.
6. Loss of control: the manager may lose touch with the
happenings in his department.
WHY MANAGERS MAY REFUSE TO DELEGATE AUTHORITY

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 1. Fear of expressing favouritism among the subordinates
2. Fear of subordinates making costly mistakes
3. The fear of subordinates taking over their jobs
4. The fear of subordinates becoming more knowledgeable
than the boss
5. The fear of repercussion and personal Judgement being
called to question
6. Sometimes due to lack of capable subordinates
7. The fear of losing touch with the department, work and
staff
8. The fear of subordinates detecting their fault
9. The fear of subordinates performing better than the boss

WHAT A MANAGER CANNOT DELEGATE

1. Setting policy objectives
2. Motivating and communicating
3. Disciplinary and human relations matter
4. Checking and analysing results
5. Setting training objectives
INTERDEPARTMENTAL AND INTRA-DEPARTMENTAL
COMMUNICATION
Communication is the process which involves transmitting
meaningful messages between senders and receivers.
Communication promotes rapid transfer of information from
one place to another. Communication can be

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interdepartmental or intra-departmental.
Interdepartmental Communication: Interdepartmental
communication is the process of sending and receiving
messages or information from one department to another
within an organisation. The various media of communication in
an organisation are: telephone, radio phone, loudspeakers,
circulars and computer terminals.
Intra-departmental communication: This is the sending and
receiving of information within the department of an
organisation. A department has various units and sections
which must be coordinated together through effective
communication system eg intercom, circulars direct
communication, bells buzzers and noticeboards.
IMPORTANCE OF COMMUNICATION TO A BUSINESS
1. It establishes and disseminates the goals of an enterprise.
2. It helps to develop plans for the achievement of the goals
and objectives of the enterprise
3. Communication leads, directs, motivates and create a
climate in which people want to contribute to the growth
of the enterprise
4. It bridges the gap between the top management and the
subordinates
5. It helps to organise human and other resources in the
most effective and efficient way
6. It facilitates official transactions between the various units,

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 sections and departments
7. It helps to select, develop and appraise members of the
organisation
8. Communication makes it possible for the day to day
activities to be speedily attended to
9. It provides permanent record for reference purposes.

ECONOMIC GROUPINGS IN WEST AFRICA

Economic grouping may be defined as the coming together
of different countries with a common economic interest and
goals with a view to promote economic cooperation and
development among member states, protect and promote
the economic and business interest of members and to
stimulate the socio-economic cum cultural development and
cooperation among its members.
Some of the economic groupings in West Africa includes: The
Economic Community of West African States, The Lake Chad
Basin Commission, Niger Basin Commission etc. we also have
International Monetary Fund (IMF) which is International
Grouping.
ECONOMIC COMMUNITY OF WEST AFRICAN STATES
(ECOWAS)
FORMATION: Economic Community of West African States
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 (ECOWAS) was formed in May 1975 with fifteen members
but has since risen to sixteen members with (Cape Verde)
purposely to promote Co-operation, development and
economic integration of West African sub-region. The
headquarters was in Lagos, Nigeria while the seat of
operation of the fund is in Lome, Benin Republic.
The treaty establishing Ecowas was signed in Lagos in 1975.
Presently we have fifteen members because Mauritania has
withdrawn from the body.
ECOWAS Member Countries: it consists mostly of countries
in West Africa namely:
1. Nigeria 9. Liberia
2. Ghana 10. Togo
3. Senegal 11. Mali
4. Niger Republic 12. Guinea Bisau
5. Burkina Faso 13. Sirra Leone
6. Cape Verde 14. The Gambia
7. Benin Republic 15. Guinea
8. Cote d’ivore

AIMS AND OBJECTIVES OF ECOWAS

1. To foster closer relations among member countries
2. To promote economic cooperation and development in
the fields of industry, agriculture, science etc.

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 3. To expand trade among countries by widening the markets
in the region
4. To improve the transport and communication system, that
is, infrastructural facilities
5. To ensure free movement of factors of production to
member states by removing every obstacle.
6. To maintain economic and political stability in the sub-
region
7. To set up military body that will maintain peace in the sub-
region eg. ECOMOG(Economic community of west African
states monitoring group)
8. To harmonise the agricultural policies and to promote joint
projects in the area of research
9. To contribute to industrial development in west Africa and
Africa as a whole
10. To abolish tariffs and other restrictions on movement
of goods and services within the sub-region
11. To promote sporting activities in the sub-region
12. To settle disputes among its members
ORGANS OF ECOWAS
The following organs governs ECOWAS
1. The Authority of Heads of states: This is the main decision
making body made up of all the members of the 16
member countries.
2. The council of Ministers: They are made up of two
representatives from each country responsible for
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 implementing the decisions of the heads of states and to
monitor the functioning and development of the
community and make recommendations to the heads of
states.
3. The Executive Secretariat: The Executive secretariat is
located in Lagos and performs administrative functions of
the community.
4. Technical and specialised commission: Four Technical and
specialised commissions were established such as:
defence, social and cultural, industry and agriculture, trade
and customs and monitoring commissions, to submit
reports and recommendations to the council of ministers.
PROBLEMS OF ECOWAS/FACTORS THAT HINDERED THE
ACHIEVEMENT OF ECOWAS
1. Fear of Dominance
2. Different currencies: e.g. the transfer of capital is difficult
or convertibility, which has reduced trading activities.
3. Political instability: that is, constant change of government
as a result of coups has adversely affected ECOWAS.
4. Colonial ties/Allegiance to former colonial masters:
members still rely on their colonial masters for technical
assistance.
5. Irregular Financial contribution of Members: They do not
contribute regularly to the community’s fund.
6. Failure of Members to implement Resolutions: Members
of ECOWAS have failed to implement some of the
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 resolutions passed by the community as these resolutions
are not binding on the countries.
7. Lack of infrastructural Facilities: majority of these
countries are not linked together by good roads and
efficient telecommunication facilities which hindered free
movement of goods and people.
8. Difference in Language: Interpreters are needed before
transactions can take place since some members speak
French while others speak English
9. Immobility of Factors of production: Language barrier
hinders mobility of factors of production in the region.
LAKE CHAD BASINCOMMISSION (LCBC)
FORMATION: Lake chad Basin Commission (LCBC) is an
organisation set-up to foster cooperation among countries
sharing a common border with Lake Chad with respect to the
usage of the Lake. That is developing ways of making use of the
water resources of the Lake. The Lake Chad Basin commission
was established by leaders of Four countries: Nigeria, Chad,
Niger and Cameroun when they signed the treaty establishing
the commission in 1964. The Chad Basin is a very large Lake
which shares borders with four countries, with its headquarters
in Ndjamena, Chad. The commission is funded by contributions
from the member nations.
AIMS AND OBJECTIVES OF (LCBC)
1. To ensure economic cooperation and development among

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 its members
2. To enhance the Agricultural potentials of the Lake Chad
3. To provide water for rural and urban areas
4. To control the pollution of the Lake
5. To re-afforestate the borders to check the advancement of
the sahara desert
6. To enhance the development of irrigation system for
Agricultural purposes
7. To construct and ensure proper maintenance of Dams,
wells and boreholes
8. To undertake scheme to control erosion and flood of the
border areas.
NIGER BASIN COMMISSION (NBC)
FORMATION: The Niger Basin Commission (NBC) was
established by countries located in the Niger Basin to maintain
better cooperation on the use of the River Niger. The treaty
establishing the commission was signed by the countries in
October, 1963. The countries are: The Republic of Benin, Chad,
Cameroun, Guinea, Burkina Faso, Nigeria, Mali, Cote d’ivore
and Niger Rebublic.
River Niger is one of the longest and largest river in the world. It
flows through many countries of the West African sub-region.
The headquarters of the commission is located in Niamey, Niger
Rebublic.
AIMS AND OBJECTIVES OF THE COMMISSION

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 1. To ensure the most effective utilisation of the resources of
the river
2. To streamline the construction of dams on the Niger
3. To undertake schemes to control floods and erosion
4. To ensure the most effective use of the Niger water
5. To promote studies on the Agricultural potentials of the
River Niger
6. To guide navigations on the Niger river.
INTERNATIONAL MONETARY FUND (IMF)
FORMATION: The International Monetary Fund was set up after
the Second World War in order to encourage the development
of foreign trade, balance of payment equilibrium, and to
stabilise exchange rate among member countries. It began
operation in 1947 with headquarters in the United States of
America. IMF was established as a result of proposals adopted
at an international conference held at Bretton Woods in 1944.
It presently has about 138 member countries.

These are some IMF Member countries and their unit of

currency
COUNTRY CURRENCY
1. Nigeria Naira
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 2. Ghana Cedis
3. America Dollars
4. Britain Pounds
5. The Gambia Dolasi
6. Liberia Dollars
7. Benin Republic CFA
8. Sierra Leone Leone
OBJECTIVE OF IMF
1. To establish and stabilise exchange rate among member
nations
2. To make fund available to members to finance balance of
payment deficit
3. To facilitate settlement of debts in foreign transactions
4. To encourage the development of international trade
5. To make recommendations to members concerning
economic policies to be adopted
6. To promote cooperation among member countries on
financial matters.

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