Change and Organisational Structures

• organisational structure is vitally important because it determines

  • Authority and responsibility

  • Individual job roles and titles

  • The people to whom others are accountable

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

  Number of layers within an organisation
• Span of Control

  number of subordinates for whom a manager is directly responsible
• A suitable span of control will depend on factors such as

  • 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
• Chain of Command

  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
• Why change the 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
• 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
• Matrix Structures

  matrix structure, individuals work across teams and projects as well as within their own department or function
• Advantages of a Matrix Structure

  -Help to breaks down traditional department barriers, improving communication

  -Individuals get to use their skills within a variety of contexts

  -Likely to result in greater motivation amongst the team members

  -Encourages sharing of good practice and ideas across departments

  -A good way of sharing resources across departments
• Disadvantages of a Matrix Structure

  -Members of project teams may have divided loyalties as they report to two line managers

  -May not be a clear line of accountability for project teams

  -Difficult to co-ordinate

  -Team members may neglect their functional responsibilities

  -It takes time for matrix team members to get used to working in this kind of structure
• Centralised Decision-Making


  keep decision-making firmly at the top of the hierarchy
• 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
• Advantages of Decentralisation

  Decisions are made closer to the customer

  Better able to respond to local circumstances

  Improved level of customer service

  Consistent with aiming for a flatter hierarchy

  Good way of training and developing junior management

  Should improve staff motivation
• 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

  Who provides strong leadership when needed

  Harder to achieve tight financial control – risk of cost-overruns
• 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 authority to make decisions to front-line staff

  • Encouraging employee feedback

  • Showing more trust in employees