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Understanding the Structure of an Organisation

CMS Vocational Training Hadyn Luke posted this on Tuesday 14th of May 2019 Hadyn Luke 14/05/2019

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Understanding the Structure of an Organisation

Every organisation – whether a small business, a multi-national or a charity – has a structure to how it is set up and run.

In today’s blog, we look at the options for structuring an organisation, including:

  1. Legal status
  2. Management
  3. Products, services, markets and sectors
  4. Vision and values

1. Legal status

Anyone who is not employed by a company but is earning money has to register with HMRC, whether as a self-employed individual or a company director. You must also pay the relevant taxes (eg income tax, National Insurance, VAT, corporation tax) and keep the correct financial records for your business activities.

Sole trader – Many people who choose to work as freelancers rather than employees set themselves up as sole traders. This can be for anything from gardening services or dog walking to IT support or personal training. Sole traders often give their activities a company name, set up a website and carry out marketing activities, even if they don’t register the business as a limited company.

A sole trader must register as self-employed with HMRC. You will keep all the profits from your business after paying tax but you will be personally liable for any losses and debts.

Limited companies – these are legally and financially separate from the people who run them – so if they fail (presuming you have met all legal responsibilities) you won’t risk losing your personal possessions (house, car, savings) to pay off any debts. Examples are:

  • Limited by shares, for companies with shares and shareholders who receive any profit. The legalities and responsibilities of a private limited company compared with a public limited company can be found here: https://www.gov.uk/limited-company-formation – but the main difference is that a public limited company can offer shares to the public on the stock exchange.
  • Limited by guarantee, where the profits are invested back into the organisation.
  • Private unlimited company, which doesn’t have to file accounts with Companies House, but where members and shareholders have unlimited responsibility if there is a formal liquidation.

Third sector organisations – These might be registered as a company limited by guarantee (see above) or a charity – or simply operate as a fundraising and/or awareness-raising organisation. Examples include hospices, arts organisations, animal charities and environmental organisations.

2. Management

Most companies have a hierarchical structure, with Directors, Managers, Departmental Heads, Team Leaders and Supervisors, as well as general workers.

Directors of a limited company will have specific legal responsibilities, which can include anything from ensuring accounts are filed correctly and on time to complying with legislations on issues such as working hours, discrimination, and health and safety.

Managers, and other staff members who lead a team or head up a department, operate as a middle level of management, with responsibilities for carrying out orders from the directors, motivating and delegating tasks to their team, delivering specific projects and facilitating the day-to-day running of the organisation.

One mistake that many owners of growing businesses make is failing to delegate. As a business expands, it’s important to employ managers and to take on staff or freelancers who can handle specialised tasks such as admin support, sales and marketing, HR and IT.

3. Products, services, markets and sectors

The structure of an organisation will reflect the products and services it supplies and the markets and sectors it operates in.

For example, a company supplying capital equipment to manufacturers and a gym might both have a structure that includes directors/managers, a sales team and administrators; however, the first company would additionally employ engineers, whereas the gym would need trained fitness professionals. Some of these roles might cross over, for example a personal trainer might also spend some time on administrative jobs or social media.

Some organisations have their structure defined by legal requirements, for example a school may be required to have a separate governing body to carry out checks and balances on senior leaders.

Charities and not for profits usually rely on support from volunteers. There are specific regulations about how you treat and safeguard volunteers and the benefits you can offer them, from training to expenses. You can find out more here: https://www.gov.uk/volunteering/volunteers-rights.

4. Vision and values

Every organisation will have its own vision and values, which are usually set out in a mission statement on the company’s website. This explains the company’s operational approach, from ethical issues to customer service.

Companies operating in the same field might take very different approaches, for example, three different printing companies might in turn offer:

  1. Value print for customers ordering in bulk
  2. Specialist print, such as laminated designs and large-scale printing
  3. Environmentally friendly print: recycled paper, vegetable oil-based printing ink and printing machines operated by a renewable energy source

When writing a mission statement, you should keep it brief and impactful while outlining what your organisation does, the specific approach you take and your vision and values.

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