organisational design

• what does the organisational structure show you

  • Authority and responsibility

  • The people to whom others are accountable

  • The formal routes through which communication flows in the business
• Hierarchy

  refer to the number of layers within an organisation.

  tall with many layers of hierarchy and were often authoritarian in nature.
• Span of control

  number of subordinates for whom a manager is directly responsible.
• span of control will depend on factors like...

  • Experience and personality of the manager

  • Nature of the business. If being a line manager requires a great deal of close supervision, then a narrower span might be appropriate

  • Skills and attitudes of the employees. Highly skilled, professional employees might flourish in a business adopting wide spans of control

  • Tradition and culture of the organisation. A business with a tradition of democratic management and empowered workers may operate wider spans of control
• Narrow Span of Control

  Allows for closer supervision of employees

  More layers in the hierarchy may be required

  Helps more effective communication
• Wide Span of Control

  Gives subordinates the chance for more independence

  More appropriate if labour costs are significant – reduce number of managers
• Chain of Command

  describes the lines of authority within a business
• Tall structure

  • Key features – many layers of hierarchy + narrow spans of control

  • Allows tighter control (less delegation)

  • More opportunities for promotion

  • Takes longer for communication to pass through the layers

  • More layers = more staff = higher costs
• Flat structure

  • Key features – few layers of hierarchy + wide spans of control

  • Less direct control + more delegation

  • Fewer opportunities for promotion, but staff given greater responsibility

  • Vertical communication is improved

  • Fewer layers = less staff = lower costs
• Delegation

  assignment to others of the authority for particular functions, tasks, and decisions
• Advantages of Delegation

  Reduces management stress and workload

  Allows senior management to focus on key tasks

  Subordinates are empowered and motivated

  Better decisions or use of resources (potentially)

  Good method of on-the-job training
• Disadvantages of Delegation

  Cannot / should not delegate responsibility

  Depends on quality / experience of subordinates

  Harder in a smaller firm

  May increase workload and stress of subordinates
• Job Empowerment

  giving employees the power to do their job. The concept is closely linked to motivation and customer service. Like Encouraging employee feedback, Showing more trust in employees
• Job Design

  • Job design is all about the tasks and responsibilities that are grouped into a specific job

  • Job design can have a significant influence on labour productivity – through the link with motivation

  • Boring, repetitive jobs can often lead to poor quality and low productivity
• Changing the Organisational Structure

  – Growth of the business means a more formal structure is appropriate

  – Reduce costs and complexity (key)

  – Employee motivation needs boosting

  – Customer service and/or quality improvements
• Challenges of changing the structure

  – Manager and employee resistance

  – Disruption and de-motivation = potential problems with staff retention

  – Costs (e.g. redundancies)

  – Negative impact on customer service or quality
• Delayering

  involves removing layers of management from the hierarchy of the organisation
• Benefits of Delayering

  Lower management costs

  Faster decision making

  Shorter communication paths

  Stimulating employee innovation
• Drawbacks of Delayering

  Wider spans of control – too wide?

  Potential loss of management expertise
• Centralised Decision-Making

  e keep decision-making firmly at the top of the hierarchy (amongst the most senior management).
• Advantages of Centralisation

  Easier to implement common policies and practices for the whole business

  Prevents other parts of the business from becoming too independent

  Easier to co-ordinate and control from the centre

  Economies of scale and overhead savings easier to achieve

  Quicker decision-making
• Disadvantages of Centralisation

  More bureaucratic – often extra layers in the hierarchy

  Local or junior managers are likely to much closer to customer needs

  Lack of authority down the hierarchy may reduce manager motivation

  Customer service does misses flexibility and speed of local decision-making
• Decentralised Decision-Making

  decision-making is spread out to include more junior managers in the hierarchy, as well as individual business units or trading locations
• Advantages of Decentralisation

  Decisions are made closer to the customer

  Better able to respond to local circumstances

  Consistent with aiming for a flatter hierarchy

  Should improve staff motivation

  Improved level of customer service
• Disadvantages of Decentralisation

  Decision-making is not necessarily “strategic”

  Harder to ensure consistent practices and policies at each location

  May be some diseconomies of scale – e.g. duplication of roles

  Who provides strong leadership when needed

  Harder to achieve tight financial control – risk of cost-overruns